The IIP Conundrum

DESPITE INDIA'S STATUS AS ONE OF THE FASTEST-GROWING GLOBAL ECONOMIES, ITS INDUSTRIAL OUTPUT TELLS A MORE SOBERING STORY. IS THE INDUSTRIAL ENGINE FALTERING BENEATH THE SURFACE OF HIGH HEADLINE GDP GROWTH?

- By Ashutosh Kumar

A COOL summer has given India's industrial sector the chills.

Growth in the country's Index of Industrial Production (IIP)—a measure of the health of the industrial sector—has been on a consistent decline for the past one year, touching a 10-month low of 1.5% in June 2025; the number was 4.9% in June 2024.

The growth of IIP's major components—mining, manufacturing, and electricity—slumped during the one-year period between June 2024 and June 2025, with the mining sector being the worst affected. From a growth of 10.3% in June last year, mining witnessed a contraction of 8.7% in June this year. Meanwhile, electricity contracted by 2.6% this year, compared with a growth of 8.6% last year. And manufacturing growth remained almost flat at 3.9%, compared with 3.5% during the year-ago period.

The stress signals

IIP in primary goods, too, has witnessed contraction; and growth in capital goods, at 3.5%, has been marginally lower in June, versus 3.6% in the year-ago period, despite the government's frontloading of capital expenditure in the current fiscal. Data indicates that consumption remains weak. In fact, data from the Ministry of Statistics and Programme Implementation (MoSPI) indicates that consumer durables, which posted 8.8% growth in IIP in June 2024, slowed down to 2.9% in June 2025. There has also been contraction in IIP for consumer non-durables in this period like last year; while the category saw contraction of 1% in June 2024, the number marginally improved to -0.4% in June 2025. IIP growth in both consumer durables and consumer non-durables has been declining since November 2024.

The decline is sharper for consumer durables, which has slowed to 2.9% in June, compared with a 14.1% growth in November. One key indicators gyrating in the negative zone, while the other hitting the slow lane in the past couple of months, points to a severe consumption stress in the economy.