India’s IIP Output Growth Eases to 3-Month Low of 4% in September

India’s IIP Growth Slows to 4% in September 2025 Amid Mining and Power Weakness

India’s industrial production grew 4% year-on-year in September 2025, marking its slowest pace in three months, as per data released by the Ministry of Statistics and Programme Implementation (MoSPI) on October 28. The moderation follows a 4.12% expansion in August, indicating a brief slowdown in industrial momentum despite festive season tailwinds.

Economists attribute the weaker print to a contraction in mining activity due to heavy monsoon rains, slower electricity generation, and temporary disruptions from the late-September Goods and Services Tax (GST) rate rationalisation.

Manufacturing Resilient Despite Sectoral Headwinds

According to Aditi Nayar, Chief Economist at ICRA, “Buoyed by stocking ahead of the GST rationalisation and festive season demand, the IIP growth for September 2025 remained steady at 4%, even as core sector growth slowed. Manufacturing output accelerated to 4.8% in September from 3.8% in August, despite an adverse base.”

The manufacturing sector’s 4.8% expansion highlights continued recovery in domestic production. However, the mining sector slipped into contraction at -0.4%, compared with 6.6% growth in August, while the electricity segment slowed to 3.1% from 4.1% a month ago.

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Mining and Electricity Weigh on Overall Growth

Industrial performance in September was dampened by weak output in mining and energy, both affected by weather-related disruptions and subdued global demand. Analysts noted that heavy rains disrupted mining operations in several key regions, while lower thermal power output constrained electricity growth.

The slowdown is in line with the broader deceleration in the core sector, which makes up 40% of the IIP. Data from the Ministry of Commerce and Industry showed that the eight core industries expanded only 3% in September, compared with 6.5% in August. Refinery products, natural gas, and crude oil registered declines, offsetting gains in steel and cement production.

Sectoral Breakdown: Infrastructure and Durables Lead the Way

The use-based classification of industrial activity shows that infrastructure-related goods and consumer durables emerged as key growth drivers in September.

The construction-linked sector continued to outperform, expanding 10.5% in September versus 10.4% in August, reflecting strong public infrastructure spending. Consumer durables saw a sharp recovery to 10.2%, supported by festive demand and easing supply chain constraints.

In contrast, consumer non-durables remained in contraction for the second straight month at -2.9%, suggesting continued rural demand weakness and inventory adjustment.

Steel and Cement Output Reflect Infrastructure Push

Among individual industries, steel output surged 14.1% and cement production rose 5.3%, underscoring the ongoing momentum in the infrastructure and construction space. These sectors have benefited from higher government capital expenditure and a steady uptick in private project execution.

However, refinery output contracted 3.7%, natural gas production fell 3.8%, and crude oil declined 1.3%, indicating that the energy sector continues to face structural challenges.

Festive Demand and GST Reforms May Boost October Data

Economists remain optimistic about October’s industrial performance. The combination of GST rate rationalisation, pent-up demand, and early festive season sales is expected to boost output in the coming months.

“Overall, the GST rate rejig, coupled with robust festive demand in September–October 2025, is likely to translate into stronger manufacturing output in October. While rationalisation could support smaller-ticket consumption beyond the festive period, sustaining momentum in high-value purchases will be the key challenge,” noted Aditi Nayar.

Outlook: Stable Momentum with Near-Term Challenges

Despite the temporary slowdown, India’s industrial growth trajectory remains supported by resilient manufacturing activity, infrastructure investment, and improving supply dynamics. Economists expect the IIP growth to stabilise in the 4–6% range in the coming quarters, barring external shocks.

However, the uneven performance across sectors underscores the need for continued policy support, particularly in mining and energy. Sustained capex push, rural demand recovery, and favourable monsoon conditions will be crucial for maintaining industrial momentum through FY2025–26.

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