Industrial output growth skids to four-month low of 3.2%

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India’s industrial output growth dropped to a four-month low of 3.2% in December, with manufacturing and mining sectors rising just 3% and 2.6%, respectively, and consumer non-durables’ production slipping 7.6% from a year ago.

Electricity generation was up 6.2% year-on-year and 4.7% over November 2024 levels. The National Statistics Office (NSO) also downgraded the industrial production growth assessment for November 2024 to 5% from 5.2% estimated earlier. This brings the average factory output growth in the third quarter of 2024-25 to 3.95% from 2.73% in the second quarter.

Five of six industrial segments based on the end-use of products, recorded an uptick in December, led by capital goods (up 10.3%) and consumer durables (8.3%). Infrastructure and construction goods rose 6.3, while intermediate goods and primary goods grew 5.9% and 3.8%, respectively.

Consumer non-durables remained a worry, with production shrinking 7.6% in December and the mere 0.6% growth estimated for November being revised downward to 0.4%. However, output levels for these consumption-linked items were at an 11-month high in December and 5.1% over November. In fact, the Index of Industrial Production (IIP) was at a nine-month high of 157.3 points, 6.1% over November. The Manufacturing as well as the Mining sectors recorded their best index reading in this fiscal year.

“This casts a doubt on a material recovery of industrial activity in the second half of the current fiscal. The 7.6% contraction in consumer non-durables outlines the continued weakness in household demand and consumption,” noted Suman Chowdhury, executive director and chief economist at Acuité Ratings & Research.

ICRA’s chief economist Aditi Nayar said the December IIP print was lower than she expected and this could moderate further to 2%-3% in January.

Terming the latest IIP a sign of subdued industrial activity and worsening performance of the consumption-oriented goods segment, Crisil chief economist Dharmakirti Joshi said this was in line with the Reserve Bank of India’s latest consumer confidence which showed weakening consumer sentiment in urban areas.

Within manufacturing, 16 of 23 industry groups recorded growth in December, with electrical equipment (up 40.1%), basic metals (up 6.7%), and coke and refined petroleum products (rising 3.9%), making the most significant contribution to growth. Based on end-use classification, the top three contributors to growth were primary, intermediate and infrastructure/construction goods, the NSO said.