Industrial output growth moderates to 3-month low of 4% in September

Manufacturing gains offset by weaker mining and electricity output; economists see GST cuts and festive demand boosting growth in coming months

India’s industrial production moderated slightly to hit a 3-month low of 4 per cent in September from an upwardly revised estimate of 4.1 per cent in August, on the back of a slowdown in the mining and electricity sector growth, according to the data released by the National Statistics Office (NSO) on Tuesday.

 

In September 2024, growth in the industrial production (IIP) index stood at 3.2 per cent. In the first half of the current financial year (H1FY26), the average IIP growth stood at 3 per cent as compared to 4.1 per cent in the same period a year ago.

 

Data showed growth in manufacturing output – which makes up about 78 per cent of the index –increased to 4.8 per cent in September from 3.8 per cent in August.  However, the mining sector witnessed a drop of 0.4 per cent and electricity growth moderated to 3.1 per cent in September from 4.1 per cent in the previous month. 

   

The 2-digit national industrial classification (NIC) level showed that the expansion in the manufacturing sector was buoyed by strong performance in basic metals (12.3 per cent), electrical equipment (28.7 per cent), and motor vehicles (14.6 per cent). Overall, out of 23 manufacturing sectors, 10 sectors, including several key consumer and export-oriented sectors such as food products, apparel, and pharmaceuticals, registered a year-on-year contraction in September.  

 

Among the use-based classification, growth in primary goods output decreased to 1.4 per cent, reflecting the weak performance of mining and electricity sectors, even as the other five sub-segments witnessed an improvement in growth performance as compared to August.

 

Consumer durables grew at a 10-month high of 10.2 per cent against 3.5 per cent the previous month, and infrastructure goods recorded a double-digit growth for the third consecutive month at 10.5 per cent. Consumer non-durables or the fast-moving consumer goods (FMCG) continued to see a contraction (-2.9 per cent), though the pace of decline softened. 

 

Madan Sabnavis, chief economist at Bank of Baroda, said that with the cuts in goods and services tax (GST) aimed at the FMCG industry, the real impact is likely to be felt in October and November, as dealers faced challenges in selling products with older price labels.

 

“Overall, the combination of GST rate rejig, pent-up demand, and the early festival onset appears to have boosted demand in September-October 2025, which is expected to augur well for the growth in manufacturing output in October as well. While the GST rationalisation may support demand for regular use/smaller ticket items post the festival season, the sustenance of the buoyancy in demand for big-ticket items remains to be seen”, notes Aditi Nayar, chief economist, ICRA Ratings. 

 

However, Rajani Sinha, chief economist at CareEdge Ratings, cautioned that the interplay between domestic drivers and external conditions will be crucial in determining the trajectory of overall industrial activity in the coming months. “Overall, multiple factors are aligning to strengthen domestic demand. However, global headwinds stemming from tariff-related uncertainties are expected to persist,” she added.