India’s industrial growth dipped to a 10-month low of 1.5% in June, primarily due to a significant slowdown in mining and electricity sectors.
A Dip in Industrial Growth
The latest data shows India’s industrial output, measured by the Index of Industrial Production (IIP), reached 1.5% in June. This figure marks a considerable drop from the 1.9% growth seen in May and the 4.9% recorded in June of the previous year (2024).
For the April-June quarter, the average IIP growth now stands at 2%, making it the lowest in 11 quarters. This highlights a broader cooling in industrial activity compared to the 3.9% average growth in the first quarter of 2025.
Unpacking the Numbers
While the overall growth slowed, the manufacturing sector, which forms over three-quarters of the IIP, showed resilience. It grew by 3.9% year-on-year, an improvement from 3.2% in May.
However, this positive performance was overshadowed by contractions in other key sectors. Mining output shrank by a sharp 8.7%, following a 0.1% decline in May. Electricity generation also fell by 2.6%, an improvement from May’s 4.7% drop but still in negative territory.
The Reasons Behind the Slowdown
Economists point to several factors for June’s industrial dip. The mining sector’s deeper contraction significantly impacted the overall growth figure, partly due to a “high base effect,” meaning June 2024 had exceptionally strong mining performance, making current growth look smaller by comparison.
Additionally, unseasonal and excessive rains during April to June affected industrial activity, particularly in mining. These rains also led to cooler temperatures, reducing the demand for power and, consequently, electricity generation.
Mixed Signals Across Industries
Looking at different types of goods, the picture is mixed. Capital goods, which are crucial for industrial investment, saw their output growth slump to 3.5% in June from a robust 13.3% in May.
Production of primary goods and consumer non-durables also continued to be lower compared to the previous year. On a positive note, consumer durables output rose by 2.9% in June, rebounding after shrinking by 0.9% in May.
Intermediate goods and infrastructure goods, vital for various industries, showed faster growth in June compared to May. Intermediate goods rose to 5.5% from 4.7%, and infrastructure goods increased to 7.2% from 6.7%.
What’s Next for the Economy?
Economists note that demand signals remain varied, with urban consumption, in particular, still lagging. However, there are hopeful signs for the consumption outlook.
Easing inflation, a favorable monsoon season, and recent interest rate cuts by the Reserve Bank of India could provide a boost. While public investment remains strong, private capital expenditure is yet to show significant traction, making demand and investment trends key indicators to watch in the coming months.
- India’s industrial growth hit a 10-month low of 1.5% in June.
- Mining output and electricity generation saw significant contractions.
- Manufacturing showed growth but couldn’t offset other sectors’ declines.
- Excessive rains and a high base effect contributed to the slowdown.
- Future economic trends will depend on demand recovery and private investment.
The coming months will be crucial to see if positive factors like easing inflation and a good monsoon can reverse this downward trend in industrial output.
