Industrial output plummets: India’s industrial engine appears to be losing steam. The index of industrial production—the country’s key barometer for factory, mining, and power sector performance—registered a sharp decline in April 2025. At 2.7%, industrial growth fell to an eight-month low, revealing growing concerns about the economy’s underlying strength.
The IIP data, released by the ministry of statistics and programme implementation, reveals a broad-based slowdown across mining, electricity, infrastructure, and consumer non-durables. The April figure marks the weakest showing since August 2024, when industrial activity had contracted by 0.1%. For mining and electricity, in particular, April 2025 was the worst month in over three quarters.
READ | Court ruling tilts India-US trade talks in Delhi’s favour
Weak demand, regulatory hurdles weigh
The mining sector bore the brunt of subdued global and domestic demand for raw materials, compounded by logistical disruptions and regulatory headwinds in key mineral-rich regions. In the power sector, demand from industrial and commercial users weakened, while distribution inefficiencies and seasonal variations dragged overall electricity output.
While the manufacturing sector offered a modest silver lining with 3.4% growth—its strongest in three months—primary goods saw a contraction of 0.4%, continuing a downward trend in output from basic materials industries. The consumer non-durables segment, a key barometer of demand for everyday goods, remained under pressure.
Adding to the unease, corporate earnings for the fourth quarter of FY25 (January–March 2025) painted a muted picture. Companies struggled with margin pressures, waning sales growth, and persistent global uncertainties—signs that the industrial slowdown is not an isolated blip but part of a wider economic malaise.
Corporate performance falters
An analysis by the Bank of Baroda of 1,787 listed companies revealed that profit after tax rose by 9.2% in Q4 FY25—down from 12.6% a year earlier. Sales growth also slowed, from 9.2% to 5.7%. While net profit margins ticked up slightly to 11.9%, the overall sentiment was weighed down by macroeconomic volatility and cautious consumer spending.
FMCG major Hindustan Unilever flagged weak urban demand in its earnings call, while Marico highlighted margin pressures driven by persistent input cost challenges. The rural recovery, though visible, was too weak to offset urban sluggishness. Export-driven firms, meanwhile, were hit by the United States’ universal 10% tariff hike implemented in April 2025. Reliance Industries reported historically low margins in downstream chemicals due to a global supply glut.
Despite the downturn, some segments stood out. Capital goods output surged 20.3% in April, buoyed by strong demand for machinery and electrical equipment—though this growth was flattered by a low base from last year. Consumer durables posted a 6.4% increase, while the automotive sector recorded a healthy 15.4% rise, driven by new model launches and festival season demand spillover.
Outlook clouded by trade risks
India’s industrial outlook remains clouded by external trade disruptions and policy uncertainty. The recent federal court ruling in the US overturning Trump-era tariffs may offer temporary relief to exporters, but the unpredictability of American trade policy—particularly in an election year—keeps businesses on edge.
Higher tariffs, slowing global growth, and an unsettled investment climate could all act as brakes on India’s export momentum. If investment flows weaken amid such uncertainties, it will be harder for India Inc to scale operations or create jobs at the pace required to meet national growth ambitions.
To hedge against this volatility, the Indian government must redouble efforts to deepen trade ties with emerging regions such as ASEAN, Africa, and the Middle East. These partnerships could help counterbalance protectionist shocks from developed markets.
Policy responses to industrial output decline
While the April data has dimmed near-term optimism, there is still hope that India’s economic fundamentals remain resilient. A benign inflation outlook, forecasted good monsoon, and signs of easing food prices could improve consumer sentiment and fuel a consumption-led revival.
The Reserve Bank of India is expected to maintain its delicate balancing act between containing inflation and supporting growth. Many analysts believe that a rate cut in the latter half of FY26 could provide relief to capital-intensive sectors and revive industrial momentum.
Policymakers must now respond with agility. The current industrial slowdown, though not yet a crisis, carries the risk of turning into a deeper drag on employment and investment if left unaddressed. Fiscal and monetary coordination, alongside strategic trade realignment, will be essential to keep India on course towards its long-term growth objectives.