India’s industrial production growth moderated to 2.7% YoY in Apr-25 from 3.9% (revised up from 3.0% earlier) in Mar-25. 

Key highlights in Apr-25 data

• On sequential basis, IIP contracted by 8.6% MoM. This is relatively better in comparison to the median contraction of 11.2% associated with the month of April.
• Among the 25 sub sectors of IIP, 2 registered a sequential expansion while 22 saw a sequential contraction.
• Sectoral classification (annualized comparison)
  1. Compared with the previous month, the loss of momentum was broad based.
  2. Nevertheless, the overall performance was led by the manufacturing sector, while the mining sector registered a contraction. 
  3. Within manufacturing industries, the top three performing subsectors were Tobacco products, Wood products, and Machinery equipment. On the other hand, the bottom three laggards were Miscellaneous products, Pharma and medicinal products, and Chemical products. 
• On Use-based classification (annualized comparison)
  1. Compared with the performance in Mar-25, Capital goods and Intermediate goods registered an improvement.
  2. Notably, strong performance was recorded by the Capital goods sector that clocked an 18-month high growth of 20.3%. While this captures favorable statistical base effect, it is also reflective of a likely pickup in government’s capex disbursal. 
  3. In contrast, growth in Consumer non-durables recorded its third consecutive annualized contraction. 

Outlook

IIP data for Mar-25 underwent a sizeable revision because of which annualized growth is now estimated to be 94 bps higher – this magnitude of revision is the highest since the initial COVID disruption. It is not clear if this is due to anticipation of global trade disruptions or because of advancement of the data release schedule by approximately two weeks. We will keep monitoring this space for possible signals.

The industrial production data for Apr-25 is the one of the first key domestic real activity indicators that captures the impact of elevated global trade uncertainty triggered by the announcement of reciprocal tariffs by the US, which is currently under suspension for a period of 90-days. While exports related uncertainty could have weighed upon domestic industrial activity in Apr-25, the overall economic picture is somewhat mixed

• Survey related indicators like the PMI Manufacturing indicate a marginal improvement. This could be indicative of correction in international commodity prices, or a perceived advantage to India from imposition of relatively higher tariffs by the US on peer countries, esp. China.
• The GST e-way bills data for Apr-25 shows annualized growth touching an 18-month high of 23.4% vs. 20.2% in Mar-25. This potentially indicates an improvement in domestic economic activity.

Going forward, industrial activity would be influenced by the following factors: 

• The uncertainty with respect to Trump tariffs will have a dampening impact on global economic activity. As per the WTO’s Global Trade Outlook and Statistics report (Apr 25), the volume of world merchandise trade is expected to contract by 0.2% in 2025 compared to 2.9% expansion in 2024. The IMF in its World Economic Outlook report (Apr-25), slashed its forecast for 2025 World GDP growth by 50 bps to 2.8%, with risks tilted to the downside.
• While the 90-day temporary suspension of the US reciprocal tariff offers reprieve, the benefit of temporary suspension will not be applicable to Automobile components, Steel, and Aluminium. Moreover, the universal base reciprocal tariff rate of 10% will continue to remain applicable in this period.

Having said, there is also a silver lining.

• It is likely that this temporary reprieve window offered by President Trump is used by select domestic manufacturers to front load their US exports to the extent possible, thereby supporting IIP partially during Q1 FY26.
• The expected roll out of a Bilateral Trade Agreement between India and the US could potentially provide clarity on market access and bilateral tariffs. As widely reported, India’s commerce ministry is expediting the first leg of the BTA, which is expected to be announced by Jul-25.

Beyond trade uncertainty, domestic drivers of industrial production remain supportive.

• Urban consumption is likely to find support from the income tax relief provided in the FY26 Union Budget along with lagged impact of ongoing monetary easing. 
• Rural consumption could benefit from the likelihood of a normal monsoon. As per the IMD, rainfall during the southwest monsoon season spanning Jun-Sep months, is expected to clock a 6% surplus (revised upwards from IMD’s preliminary estimate of 5%) over the long period average.
• The finance ministry has instructed all ministries and departments to front load their capex spending to bolster domestic capacity and growth amid an uncertain global environment.
• An expected moderation in CPI and WPI inflation in FY26 would support consumption and investment demand.

Below is Acuité Ratings & Research Limited's comment:

 “The IIP for April 2025 marks a moderately positive start to the fiscal year, surpassing expectations, with overall growth at 2.7% YoY. This was despite a disappointing core sector performance that accounts for over 40% of the index. Manufacturing was the main driver, expanding by 3.4%, led by robust growth in machinery and equipment (17.0%), motor vehicles (15.4%), and basic metals (4.9%). These gains reflect improving momentum in investment-linked and transport-related sectors, hinting at a revival in private capex. However, the recovery remains uneven, with contractions in pharmaceuticals (-3.9%) and chemicals (-3.6%), likely reflecting global uncertainties. Mining output slipped marginally by 0.2%, while electricity posted a subdued 1.1% increase.

From a use-based classification perspective, the data shows stronger signs of investment-led activity. Capital goods output surged by 20.3%, mainly due to a high base. Intermediate goods and construction goods registered steady growth at 4.1% and 4.0%, respectively, supported by public spending. On the consumption side, the divergence persists: consumer durables rose by 6.4%, while consumer non-durables contracted by 1.7%.

Looking ahead, the trajectory of industrial growth in FY26 will depend on normal monsoon, especially as excess rainfall in some regions raises near-term concerns. Global headwinds continue to pose a risk, with trade tensions between the US and the EU growing and the global growth outlook still dim.”

Table 1: Annualized growth in IIP and its key components

Chart 1: Uncertain global trade backdrop weighs upon IIP in Apr-25

Chart 2: Upward revision in Mar-25 IIP data is the strongest after the COVID disruption