February IIP Growth Falls Amid Weak Core Sector and Base Effect Pressures
India’s industrial production growth slowed to a six-month low of 2.9 percent in February 2025, down from 5.2 percent in January, as per official data released on April 11. The deceleration, largely anticipated by economists, reflects both a challenging base effect due to the leap year and underwhelming sectoral contributions, particularly from manufacturing and mining.
The core sector, which comprises eight key infrastructure industries and carries a 40 percent weight in the Index of Industrial Production (IIP), had already signaled this moderation with its five-month low growth of 2.9 percent in February. The weakening in industrial activity further underscores the fragility of India’s ongoing recovery, particularly in the context of muted domestic demand and inconsistent capital formation.
Highlights:
IIP growth slowed to 2.9% in Feb, vs 5.2% in Jan.
Core sector growth dropped to 2.9%, lowest in 5 months.
Weak base effect from leap year partly responsible.
Manufacturing and Mining Weaken, Electricity Holds Firm
The February data indicates a broad-based moderation across sectors. Among the three major sectors:
Manufacturing, which forms the largest component of the IIP, grew at 2.9%, sharply lower than 5.8% in January.
Mining output slowed to a four-month low of 1.6%, from 4.4% previously.
Electricity generation bucked the trend, accelerating to 3.6% from 2.4%, the only major sector to post stronger growth.
This weakness is particularly notable as manufacturing, which accounts for over three-fourths of the industrial index, is expected to close FY25 with full-year growth of only 4.3%, sharply lower than the 12.3% seen in FY24.
Highlights:
Manufacturing growth halved to 2.9% in Feb.
Mining output growth fell to 1.6%, lowest in 4 months.
Electricity sector grew 3.6%, up from 2.4% in Jan.
Use-Based Industries Show Across-the-Board Weakness
The slowdown in industrial activity was reflected across all six use-based industrial categories, signaling subdued demand and slack in capital deployment. Key segments fared as follows:
Consumer non-durables continued to contract at -1.8%, deeper than the -0.3% fall in January.
Consumer durables saw growth fall to 3.9%, down from 7.2% in the prior month.
Primary goods posted growth of 2.8%, nearly halved from 5.5% in January.
Capital goods, often viewed as a proxy for investment activity, remained strong at 9.0%, but still slipped from 10.3%.
Infrastructure/construction goods grew 6.4%, down from 7.4%, mirroring the mild slack in government infrastructure spending.
Intermediate goods registered a minor deceleration.
The persistence of contraction in consumer non-durables, along with the drop in consumer durables, indicates persistent consumption-side weakness, despite stable urban demand signals. Rural demand remains subdued.
Highlights:
Consumer non-durables contracted by 1.8%.
Capital goods strong at 9%, but slower than January.
Infrastructure goods growth fell to 6.4% from 7.4%.
Government Capex Pickup Still Modest, March Trends Likely Flat
The deceleration in February also mirrors the slower-than-expected pickup in government capital expenditure, which reached only 80% of the full-year target by the end of February. While central capex is gradually recovering, its impact on industrial growth remains partial and uneven across sectors.
Looking forward, March is unlikely to reflect a sharp recovery, according to economists. ICRA projects industrial output growth for March 2025 to remain around 3.0%, largely unchanged from February levels. While electricity generation may support overall figures, continued pressure on mining output and steady manufacturing are expected to keep industrial momentum muted.
Highlights:
Govt capex at 80% of FY25 target by February end.
March IIP projected at ~3%, flat vs February.
Electricity expected to support IIP, while mining may weaken.
