IIP growth slows to 4% in August as manufacturing output weakens

India's industrial output grew 4% in August 2025, down from 4.3% in July, as manufacturing slowed even as infrastructure goods and mining provided partial support

Despite a favourable base effect, growth in the industrial production moderated to 4 per cent in August from an upwardly revised figure of 4.3 per cent in July, on the back of a slowdown in the manufacturing sector growth, according to the data released by National Statistics Office (NSO) on Monday.

 

In August 2024, growth in the index of industrial production (IIP) stood at 0 per cent. Data showed that the output of the manufacturing sector eased sharply to 3.8 per cent in August from 6 per cent in the preceding month, while the electricity sector output touched a five month high of 4.1 per cent and mining output turned positive (6 per cent) after a gap of four months.

   

In the first five months (April-August) of the current financial year, the average IIP growth stands at 2.8 per cent as compared to 4.3 per cent in the corresponding period of the previous financial year.

 

When looked at the 2-digit national industrial classification (NIC) level, the slowdown in the manufacturing sector was on account of decline in the output of 13 out of 23 manufacturing sectors like food products, beverages, textiles, apparel, leather products, chemicals, pharmaceuticals among others.

 

Meanwhile, at the use-based classification, the growth in primary goods (5.2 per cent) output accelerated to a 7-month high of 5.2 per cent in August, reflecting the trends in mining and electricity generation, even as all the other five sub-segments witnessed a deterioration in their growth performance as compared to July.

 

Notably, consumer non-durables witnessed the steepest contraction (-6.3 per cent) in eight months, while the growth in consumer durables halved to 3.5 per cent. The infrastructure goods output - though decelerated yet recorded a double-digit (10.6 per cent) growth for the second consecutive month, suggesting that growth in construction activity is likely to have remained healthy.

 

“(Dampening in consumption) may reflect inventory management to avoid stranded taxes ahead of the GST rationalisation. Looking ahead, the GST rationalisation is expected to boost consumption demand during the festive season, which is likely to augur well for manufacturing output in September-October 2025, once the older inventories are off the shelves. While this may partly offset the adverse impact of the US tariffs and penalties, an unfavourable base may constrain expansion in the IIP in these months,” notes ICRA Ratings Chief Economist Aditi Nayar.

 

Echoing similar views, CareEdge Ratings Chief Economist Rajani Sinha says that consumption trends will remain a key monitorable, with GST reforms expected to provide a much-needed fillip to the demand scenario ahead of the festive season. Additionally, income tax reductions, lower food inflation, and RBI rate cuts provide a supportive backdrop for consumption.

 

“In the midst of a challenging external environment, a revival in domestic demand aided by these factors can help spur private capex and support the overall IIP growth going forward,” she added.