KEY TAKEAWAYS  Growth in India’s IIP inched up a tad to 3.0% YoY in Mar-25 from 2.7% in Feb-25.  On annualised basis, headline growth was led by the utilities sector (on the sectoral front) and infrastructure/construction sector along with consumer durables (on the use-based front). In contrast, consumer non-durables posted an annualized contraction, yet again. The uptick in Mar-25 IIP growth is tepid due to absence of year end favourable seasonality and no sign of a net boost from US export-oriented manufacturers maximizing production before the anticipated imposition of reciprocal tariffs from Apr-25.  For FY25, IIP registered an expansion of 4.0%, lower than the growth of 5.9% in FY24. While, the deceleration is broad based on the sectoral front, it is led by the Mining sector. As per the use-based classification, barring consumer durables, all other sub sectors posted a moderation – with, consumer non-durables posting a contraction. Going forward, the cloudy external trade environment could have a large impact on the IIP performance. We hope the anticipated India-US BTA would offset some of this adverse impact. Fortunately, domestic drivers appear to be well supported with forecast of a normal monsoon outturn, income tax relief from the Union Budget, and the RBI’s accommodative monetary policy.

India’s industrial production* growth inched up a tad to 3.0% YoY in Mar-25 from 2.7% (revised down from 2.9% earlier) in Feb-25.

Key highlights in Mar-25 data

• On sequential basis, IIP expanded by 9.1% in Mar-25. This is lower in comparison to the median expansion of 10.7% associated with the month of March.
• Among the 25 sub sectors of IIP, 23 registered a sequential expansion while 2 saw a sequential contraction.
• Sectoral classification (annualized comparison)
  1. The overall performance was led by the utilities sector, with growth under this category touching an 8-month high of 6.3%. 
  2. The Manufacturing sector played a minor supportive role. Within manufacturing industries, the top three performing subsectors were Tobacco products, Computer, electronic and optical products, and Electrical equipment. On the other hand, the bottom three laggards were Furniture, Printing and reproduction of recorded media, and Leather. 
  3. The Mining sector on the other hand proved to be a drag, with growth slipping to a 6-month low of 0.4%.
• On Use-based classification (annualized comparison)
  1. Strong performance was recorded by Infrastructure & construction goods (clocked a 17-month high growth of 8.8%), and Consumer durables. 
  2. Meanwhile, there was modest support from Primary goods and Intermediate goods.
  3. In contrast, growth in Capital goods decelerated sharply (to a 7-month low of 2.4%), while Consumer non-durables recorded a contraction yet again. 

Outlook

Although IIP growth moved up in Mar-25 over the previous month, the improvement can be termed tepid at best. 

• The year end favorable seasonality appears rather underwhelming this time.
• There is no sign of a net boost from US export-oriented manufacturers maximizing production before the anticipated imposition of reciprocal tariffs from Apr-25. 

 

For FY25, IIP registered an expansion of 4.0%, lower than the growth of 5.9% in FY24. While, the deceleration is broad based on the sectoral front, it is led by the Mining sector. On the use-based classification, barring consumer durables, all other sub sectors posted a moderation – among them, consumer non-durables posted a contraction. 

 

The dual divergence within IIP continued to play out during the course of FY25:

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* The quick estimate of IIP data was hitherto released with a lag of 6 weeks. As per the MOSPI’s revised calendar, the quick estimate of IIP will henceforth be released with a lag of 4 weeks. These quick estimates will undergo revision in subsequent releases as per the usual revision policy.

• Despite sharp deceleration in the pace of public capex disbursal (central and state governments put together saw their capital expenditure registering a contraction of 0.7% between Apr-Feb FY25 compared to a robust expansion of 35.1% in the corresponding period in FY24), investment oriented industrial production outpaced consumption oriented industrial production.
• Within the consumption space, the divide became sharp in FY25 with consumer durables registering a healthy expansion of 8.0% while consumer non-durables recorded a contraction of 1.6%. This in our opinion predominantly underscores the divide between urban and rural consumption. Notably, production of consumer non-durables in Mar-25 is lower than its pre COVID levels in Mar-19. This is despite three years of relatively strong recovery in the broader economy.

Going forward, the external environment could have a large impact on the IIP performance. 

• 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.
• Electrical and mechanical machinery, Textiles and products, Gems and jewellery, pharmaceutical products, and Mineral fuels are the top five vulnerable sectors exposed to the US.

Having said, there could also be a silver lining.

• It is likely that this temporary reprieve window offered by President Trump is used by domestic manufacturers to front load their US exports to the extent possible, thereby supporting IIP 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 within the 90-day tariff suspension period.

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 5% surplus 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.

 

Below is Acuité Ratings & Research Limited's comment:

“The IIP for March 2025 points to a modest recovery, with headline growth registering at 3.0% YoY, slightly better than Feb’s 2.9%. Electricity led the gains with 6.3% growth, while manufacturing only inched up to 3.0%. Mining growth remained subdued at 0.4%.

On a use-based classification, infrastructure goods (8.8%) and consumer durables (6.6%) remained the strongest, buoyed by government spending. However, consumer non-durables remain a pain point.

That said, the overall IIP average growth for FY25 stood at 4.0%, a step down from 5.9% in FY24, indicating that the sector has remained weak in this fiscal. As we advance, sustaining a broad-based industrial recovery will require stronger consumption pickup in both urban and rural markets, a continued push from government capex, and a revival in private capex, even as there is a risk of plateauing government capex as fiscal consolidation gains priority.”

Table 1: Annualized growth in IIP and its key components

 

Chart 1: A broad-based moderation in IIP growth took place in FY25