Industrial Output Slows Down: February Sees Lowest Growth in Six Months

In February, India’s industrial output recorded its slowest growth in six months, with an increase of just 2.9% year-on-year. This decline, highlighted in the latest government report, signals waning momentum in both the manufacturing and mining sectors. The previous month, January, saw a more robust growth rate of 5.2%, indicating a stark contrast in economic activity.

Manufacturing Sector Faces Challenges

The manufacturing sector, which constitutes a significant 77.6% of the Index of Industrial Production (IIP), experienced a notable slowdown. February’s growth of 2.9% was a drop from 5.8% in January and 4.9% in the same month last year. Key areas such as chemicals, coke, and petroleum refinery saw contractions, while growth in sectors like basic metals and transport equipment also decelerated.

• Key statistics:
  • February manufacturing growth: 2.9%
  • January manufacturing growth: 5.8%
  • Previous year’s February growth: 4.9%

The decline in industrial output can be partly attributed to a high comparative base of 5.6% from the previous year, notably influenced by the additional leap-year day.

Purchasing Managers Index Reflects Concerns

This slowdown is consistent with findings from India’s Manufacturing Purchasing Managers Index (PMI), which dipped to a 14-month low of 56.3 in February. Despite these challenges, the PMI remains in expansion territory, indicating that global demand is still positively impacting the Indian manufacturing landscape. Increased purchasing activity and job creation were reported, demonstrating resilience in certain areas.

Crisil’s Insights on Industrial Performance

According to Crisil, the IIP figures confirm a slowdown in manufacturing, although the agency noted better average performance in the second half of 2024-25. Growth in sectors like petroleum products, machinery, and textiles has helped maintain momentum, with the latest RBI Quarterly Industrial Outlook survey revealing improved demand conditions among firms in the fourth quarter.

Diverse Performance Across Sectors

When analyzing use-based categories, February’s growth across all sectors slowed compared to both January and February of the previous year, except for consumer non-durables, where contraction rates moderated. Consumer durable goods growth fell to a 15-month low of 3.8%, while consumer non-durables experienced a 2.1% decline, marking the third consecutive month of contraction.

Conversely, capital goods and infrastructure goods showcased resilience, with year-on-year growth rates of 8.2% and 6.6%, respectively. This uptick reflects strong investment demand, bolstered by increased government spending on infrastructure projects.

Analysts Weigh In on Future Trends

Senior analyst at India Ratings and Research, Paras Jasrai, noted that this data suggests a sustained but moderate growth trajectory in investment demand and construction sector output. However, the intermediate goods sector showed a troubling growth rate of just 1.5%, down from 8.6% in February of the previous year.

Looking ahead, analysts point to signs of declining consumption demand in February 2025, but with a positive outlook due to easing food inflation and anticipated monetary easing. Chief economist at Care Ratings, Rajani Sinha, highlighted the ongoing global uncertainties affecting both private investment and consumption, though RBI’s recent rate cuts may offer some relief.

In summary, while February’s industrial output reflects a slowdown, there are glimmers of hope as government initiatives and global demand continue to play a crucial role in shaping India’s economic landscape.