India's Industrial Output Grows 5% in January, Driven by Manufacturing Sector

India’s industrial production climbed to a five-month high of 5 percent in January, improving from 3.5 percent in the previous month, driven by growth in manufacturing and mining, according to government data released on March 12.

"IIP growth improved to a higher than expected 5 percent in January 2025, led by manufacturing and mining. The use-based data is less enthusing, with a sequential YoY pickup seen in only two segments (consumer non-durables and primary goods) amidst a slowdown in the other four," said Aditi Nayar, Chief Economist at ICRA.

Industrial production for January

Industrial production growth surprises

The reported figure exceeded Moneycontrol's poll forecast of 3.5 percent and even surpassed the upper limit of the projected range of 3 to 4.4 percent.

Among the three key industries monitored by the Index of Industrial Production, electricity was the only sector to experience a slowdown, with growth moderating to 2.4 percent from 6.2 percent. Meanwhile, manufacturing, which constitutes nearly two-thirds of the index, saw an increase to 5.5 percent from 3.4 percent, while mining expanded to 4.4 percent from 2.7 percent in the previous month.

January also contributed to an overall improvement in fiscal growth, raising the average growth for the first ten months to 4.2 percent.

Additionally, industrial growth in the third quarter climbed to 4 percent, up from 2.7 percent in the preceding quarter.

Mining and manufacturing perform better

The improvement was also evident in the growth of capital and infrastructure goods, which, despite slowing in February, expanded by over 7 percent for the month. Consumer durables registered a 7.2 percent growth, though slightly lower than the 8.3 percent recorded in the previous month. Meanwhile, consumer non-durables remained in contraction for the second consecutive month, although the rate of decline moderated.

"A sustained and broad-based improvement in consumption remains critical, especially given the context of trailing urban demand. The latest inflation print has shown a significant moderation to 3.6 percent in February from 4.3 percent in January," Rajani Sinha, Chief Economist at CareEdge, stated.

Despite an improvement in January, India's manufacturing growth is expected to underperform in FY25, with second advance estimates projecting a 4.3 percent growth compared to 12.3 percent in the previous year.

In the third quarter, India's manufacturing sector grew by 3.5 percent, while the overall economy expanded by 6.2 percent.

(This Article was originally published by Money Control)