India’s industrial output slowed to a mere 1.5 percent year-on-year in June 2025, marking the lowest growth recorded in the past 10 months, as per data released by the Ministry of Statistics and Programme Implementation (MoSPI) on August 1. The latest figures from the Index of Industrial Production (IIP) indicate a broad-based deceleration, primarily led by the mining, electricity, and primary goods sectors, although there was some resilience in manufacturing.

This downtrend raises concerns about the momentum of India’s post-pandemic economic recovery and its ability to sustain consistent industrial expansion in the face of sluggish global demand, monsoon variability, and persistent supply-side challenges.

Headline IIP growth slows sharply

According to the official data, the IIP grew only 1.5 percent in June 2025, compared to 5.2 percent growth in May 2025 and a robust 8.3 percent growth in June 2024. This is the slowest industrial growth rate since August 2024.

The cumulative growth for April–June 2025 now stands at 3.6 percent, lower than the 5.4 percent seen during the same period last year.

Sector-wise performance

The sharp fall in overall industrial growth was primarily driven by weakness in:

• Mining output, which contracted by 2.4 percent in June, compared to 7.6 percent growth a year ago.

• Electricity generation, which declined by 1.1 percent, reflecting reduced demand and transmission issues in some regions.

• Primary goods, which grew by only 0.9 percent, a steep fall from 6.1 percent growth in the previous month.

In contrast, the manufacturing sector, which constitutes 77.6 percent of the IIP, grew by 2.4 percent in June, showing marginal improvement compared to 1.9 percent growth in May. This improvement came largely from consumer durables and select infrastructure goods.

Use-based classification of goods showed a mixed trend:

• Capital goods grew by 3.2 percent

• Consumer durables rose 4.5 percent

• Consumer non-durables declined 2.3 percent

• Intermediate goods grew 2.1 percent

• Infrastructure goods slowed to 1.1 percent

This mixed trajectory suggests uneven recovery in investment-driven segments and a weakness in rural consumption.

Economists flag concerns over broad slowdown

Commenting on the data, economists noted that the industrial growth slowdown was sharper than expected and indicative of underlying fragilities in demand and supply chains.

Aditi Nayar, Chief Economist at ICRA, said:

“The dismal 1.5 percent growth in June reflects sluggishness in mining and electricity. The sharp fall in electricity output is a concern, especially in a peak consumption month.”

Barclays India said in a note that the data showed early signs of exhaustion in the industrial cycle, and growth could remain subdued unless investment demand improves and global trade stabilises.

Regional and seasonal factors at play

Several state-level and seasonal factors contributed to the June slowdown:

• Delayed monsoon in parts of North and West India led to slower agricultural activity, indirectly impacting industrial demand.

• Floods and heatwaves in eastern and northeastern states affected power transmission and mining operations.

• High base effect from June 2024 also influenced this year’s low growth.

Moreover, export-linked industries faced continued headwinds due to soft global demand, rising freight costs, and geopolitical uncertainty.

Manufacturing shows modest revival

Despite the bleak headline number, the manufacturing sector recorded a modest pickup, especially in high-value segments like:

• Automobile production, driven by new launches and pre-festive inventory buildup

• Electrical equipment, due to infrastructure-led demand

• Chemicals and pharmaceuticals, supported by export orders

However, smaller firms, especially in textiles, footwear, and ceramics, continued to face challenges in terms of input cost pressures, weak rural demand, and working capital constraints.

Government response and outlook

The Ministry of Finance, in its monthly economic review, acknowledged the slowdown but said the fundamentals of the economy remain strong. A spokesperson said:

“Industrial indicators may fluctuate monthly, but overall economic momentum remains intact. The government is monitoring the situation and is ready to support key sectors if necessary.”

The Reserve Bank of India (RBI), which is set to announce its next policy decision in mid-August, will likely take note of the weak IIP data while maintaining its focus on inflation containment.

Experts believe that targeted fiscal support, such as infrastructure investments, MSME credit incentives, and export assistance, may be required to lift industrial sentiment.

Comparative view and historical trend

Here’s how industrial growth has trended over the past 10 months:

This chart reveals a clear softening trend, with June’s number being a sharp deviation from the recent average.

Industrial outlook for FY2025–26

While the first quarter of FY2025–26 has shown an average growth of 3.6 percent, economists warn that unless monsoon performance, rural incomes, and export trends improve, the full-year industrial outlook may remain tepid.

The Confederation of Indian Industry (CII) called for expedited GST refunds, power tariff rationalisation, and infrastructure project clearances to improve industrial morale.

Conclusion

India’s industrial growth falling to a 10-month low of 1.5 percent in June 2025 underscores the need for targeted policy measures and close macroeconomic monitoring. While manufacturing has offered a silver lining, the poor performance of mining, electricity, and primary goods raises red flags.

The government now faces the twin challenge of reviving demand while maintaining fiscal discipline, as global uncertainties and internal weather disruptions threaten to drag down India’s economic momentum in the coming months.

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