India's IIP growth recovers to 3% in March, FY25 output at 4-year low

The Index of Industrial Production (IIP) growth recovered slightly to 3 per cent in March from a six-month low of 2.72 per cent in February, while overall industrial output growth for 2024-25 (FY25) stood at a four-year low of 4 per cent. By comparison, IIP had grown by 5.9 per cent in 2023-24.

 

The subdued FY25 performance reflects the broader industrial growth trajectory, which saw contractions in specific sectors. The consumer non-durables segment contracted 1.6 per cent, while growth rates in infrastructure industries (6.6 per cent), intermediate goods (4.1 per cent), capital goods (5.5 per cent), and primary goods (3.9 per cent) all decelerated.

 

However, consumer durables saw strong growth of 7.9 per cent, driven by sectors like electronics and computers.

 

In March, industrial output growth saw a slight gain, driven by an acceleration in the electricity sector (6.3 per cent) and a mild uptick in the manufacturing sector (3 per cent). This was, however, offset by a dip in mining sector growth (0.4 per cent).

 

In March 2024, the IIP had grown by 5.4 per cent. Previously, in 2020-21, it had contracted 8.4 per cent during the pandemic.

 

Madan Sabnavis, chief economist at Bank of Baroda, said industrial growth had been more subdued this year, with the consumption side of the story having a major influence. 

 

According to use-based classification, infrastructure goods (8.8 per cent) and consumer durables (6.6 per cent) grew at a robust rate, while output in capital goods (2.4 per cent) decelerated.

 

The primary goods (3.1 per cent) and intermediate goods (2.3 per cent) saw a slight acceleration in output. Meanwhile, the 4.7 per cent contraction in the output of consumer non-durables deepened further and remained in the negative for a fourth consecutive month.

 

Rajani Sinha, chief economist at CARE Ratings, said the manufacturing sector in March might have benefited from inventory accumulation by companies ahead of the anticipated announcement of reciprocal tariffs. However, monitoring consumption trends remains critical, given the ongoing unevenness in the domestic demand landscape.

 

“While rural demand is showing signs of recovery, lagging urban demand continues to be a concern. Factors such as declining inflation, healthy agricultural activity, lower borrowing costs, and a reduced income-tax burden are expected to support consumption demand going forward,” she added.

 

Starting April 2025, IIP data will be released on the 28th of every month, thus reducing the time lag from 42 days to 28 days from the reference month and eliminating the second revision of IIP.

 

Aditi Nayar, chief economist at Icra Ratings, said the lower response rate associated with the advancement of the data release had dampened the estimated growth rate for March, which might subsequently undergo a larger revision than past ones.

 

“Looking ahead, while there is some evidence as well as commentary around frontloading in exports to the US, we need to see whether this is driven by redirection away from other geographies or a bump-up in output in the ongoing month," she added.