India’s industrial sector showed signs of slowing momentum as the Index of Industrial Production (IIP) growth fell sharply to just 1.2% in May 2025, marking its weakest performance since August 2024. The latest data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Monday reflects broad-based deceleration in manufacturing and electricity output, raising concerns over the strength of India’s industrial recovery amid global and domestic headwinds.
Key Highlights
✅ IIP growth (May 2025): 1.2%
✅ Previous month (April 2025): 4.3%
✅ May 2024 growth: 5.7% (YoY)
✅ Sectoral performance: Manufacturing (+0.8%), Mining (+5.2%), Electricity (-2.1%)
✅ Growth trend: Lowest in 9 months (since August 2024’s 0.9%)
What Is IIP?
The Index of Industrial Production measures the change in volume of production in industrial sectors including manufacturing, mining, and electricity.
| Base Year: | 2011-12 |
|---|---|
| Weightage: | Manufacturing (77.6%), Mining (14.4%), Electricity (8.0%) |
Month-on-Month Growth Trend
Pivot Table: IIP Growth Trend (Last 9 Months)
| Month | IIP Growth (%) |
|---|---|
| Sep-24 | 2.4 |
| Oct-24 | 11.7 |
| Nov-24 | 2.1 |
| Dec-24 | 4.6 |
| Jan-25 | 5.9 |
| Feb-25 | 4.5 |
| Mar-25 | 5.4 |
| Apr-25 | 4.3 |
| May-25 | 1.2 |
(Source: MoSPI)
Sector-wise Performance Analysis
1. Manufacturing Sector
- Growth: +0.8% in May (vs +5.5% May’24)
- Reason: Weak domestic demand in consumer durables and intermediate goods.
| Use-Based Classification | Growth (%) |
|---|---|
| Primary goods | +2.3 |
| Capital goods | +1.5 |
| Intermediate goods | +0.4 |
| Infrastructure/construction goods | +3.1 |
| Consumer durables | -3.9 |
| Consumer non-durables | +0.7 |
2. Mining Sector
- Growth: +5.2% in May (vs +7.2% May’24)
- Supportive factors: Higher coal and lignite output, aiding thermal power generation.
3. Electricity Sector
- Growth: -2.1% in May (vs +0.8% May’24)
- Reason: Lower peak power demand due to unseasonal rains in parts of North and East India.
Top Performing Industries (Manufacturing)
| Industry Group | Growth (%) |
|---|---|
| Manufacture of machinery & equipment | +7.2 |
| Manufacture of beverages | +5.5 |
| Manufacture of basic metals | +3.4 |
Worst Performing Industries
| Industry Group | Growth (%) |
|---|---|
| Manufacture of computer, electronic products | -6.1 |
| Manufacture of electrical equipment | -4.4 |
| Manufacture of motor vehicles, trailers | -3.2 |
Comparison With Previous Year
| Month | IIP Growth May’24 (%) | IIP Growth May’25 (%) |
|---|---|---|
| May | 5.7 | 1.2 |
This sharp deceleration indicates cooling industrial activity, despite positive PMI manufacturing data seen in recent months.
Expert Analysis
1. Demand Weakness Evident
Aditi Nayar, Chief Economist, ICRA:
“The IIP data is disappointing, especially the contraction in consumer durables, reflecting tepid rural demand and cautious urban discretionary spending.”
2. Inflation Impact
Elevated inflation in food and fuel categories may have compressed disposable incomes, dampening consumer demand, which directly affects manufacturing growth.
3. Seasonal Factors
May recorded unseasonal rainfall in multiple regions, impacting:
- Construction activities.
- Power demand for cooling and irrigation.
- Mining and mineral extraction efficiency.
Government’s Response
The Ministry of Finance issued a statement highlighting:
“While IIP growth slowed in May, leading indicators such as GST collections, highway construction, and power generation remain robust, suggesting underlying economic momentum is intact. The government remains committed to supporting manufacturing through PLI schemes and infrastructure investments.”
Market Reactions
- Equity markets: Limited impact, with Nifty and Sensex trading marginally lower due to global cues.
- Bond yields: Unchanged, as IIP data is not a direct market mover for sovereign debt pricing.
- Rupee: Remained stable near 83.48/USD amid mixed global economic data.
Short-Term Outlook
Positive Drivers Ahead
✅ Kharif sowing to boost rural demand in July-September.
✅ Festive season manufacturing orders to pick up from August onwards.
✅ PLI scheme disbursements expected to accelerate production in electronics and auto ancillaries.
Risks To Watch
❌ Global slowdown or recession risks in US, Europe, China.
❌ Geopolitical tensions raising commodity prices.
❌ Persistent high food inflation affecting consumption.
Long-Term Perspective
Despite the May dip, industrial production is expected to grow at 4-5% in FY26, supported by:
- Government’s capex push (Rs 11.1 lakh crore budgeted).
- Manufacturing incentives under PLI schemes worth Rs 1.97 lakh crore.
- Robust service sector demand indirectly driving industrial consumption.
Conclusion
India’s IIP growth decelerating to 1.2% in May 2025 is a reminder that while the economy remains broadly resilient, industrial growth faces headwinds from weak consumer demand, erratic weather, and global uncertainties.
Policy makers are likely to watch upcoming data closely to decide on fiscal and monetary policy calibrations to sustain India’s growth trajectory towards becoming a $5 trillion economy by 2028.
Disclaimer
This article is based on data released by MoSPI and expert insights as of June 30, 2025. Figures are provisional and subject to revision. Readers are advised to refer to official publications for investment decisions.
