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IIP growth decelerates to 4% in Aug’25

Mainly led by slowdown in manufacturing sector

* Industrial output grew 4% YoY in Aug’25 (vs. 4.3% in Jul’25). Acceleration in mining and electricity sectors’ growth was offset by deceleration in manufacturing sector output growth. The output of consumer non-durable goods contracted, while consumer durables output growth decelerated. IIP growth has remained relatively subdued in recent months, with 5MFY26 growth at 2.9%, lower than the 4.3% seen in the same period last year.

* Electricity output increased at a five-month high pace of 4.1% in Aug’25 (vs. 3.7% in Jul’25), while mining output grew at a 14-month high rate of 6% in Aug’25 (vs. -7.2% in Jul’25), marking its first expansion in five months (Exhibits 1 and 2).

* On the other hand, manufacturing output growth decelerated to 3.8% in Aug’25 vs. 6%/1.2% in Jul’25/Aug’24 (Exhibit 1). The details of the manufacturing sector suggest that 42.6% of the sub-sectors grew at a slower rate compared to Aug’24 (vs. 52.4% in Jul’25), 51% of the items grew less than 5% (vs. 55% in Jul’25), and 44% of the items posted a contraction (vs. 29.5% in Jul’25) (Exhibit 3).

* According to the use-based classification, consumer goods output posted weak performance during the month. The output of consumer non-durable goods declined by 6.3% in Aug’25, compared to a growth of 0.5% in Jul’25. The growth of consumer durables output decelerated to 3.5% in Aug’25 from 7.3% in Jul’25. Even capital goods output growth decelerated to 4.4% in Aug’25 from 6.8% in Jul’25. On the other hand, primary goods, intermediate goods and infra goods posted robust growth in Aug’25 (Exhibit 4).

* Overall, demand recovery remains uneven, with urban consumption still lagging behind. This patchy demand is affecting private investment, which continues to stay weak. Global uncertainties are also dampening investor confidence. However, falling inflation, a good monsoon, and interest rate cuts by the RBI are expected to support economic growth. Going forward, it will be important to closely monitor both consumption and investment trends. 

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