Industrial Growth Loses Steam in August

India’s industrial production expanded by 4% year-on-year in August 2025, down slightly from 4.3% in July. The moderation was primarily led by manufacturing, which slowed to 3.8%, reflecting weaker export orders and muted domestic demand.

While mining rebounded with a strong 6% growth and electricity output rose 4.1%, these gains were not enough to offset manufacturing weakness.

Sectoral Snapshot

• Manufacturing : Growth eased to 3.8% vs. 6% in July, driven by sluggish factory output.

• Mining : Jumped 6% after a steep 7.2% contraction in July, led by higher coal and mineral production.

• Electricity : Rose 4.1% vs. 3.7% in July, reflecting improved energy consumption across households and industries.

Demand-Side Trends

• Consumer Durables (cars, appliances, electronics): Slowed to 3.5% growth, down from 7.2% in July.

• Consumer Non-Durables (FMCG, packaged foods, personal care): Contracted 6.3%, signaling stress in daily household spending.

• Capital Goods: Grew 4.4%, easing from 6.8% in July, indicating cautious investment sentiment.

• Infrastructure & Construction Goods: Outperformed with 10.6% growth, supported by strong government-led capex and ongoing construction activity.

Expert Takeaways

• Aditi Nayar, ICRA : “The moderation in August was entirely led by manufacturing. Mining and electricity supported growth, but not enough to offset the drag. GST rationalisation and festive demand may improve activity in coming months.”

• Market analysts caution that weak non-durables highlight fragile demand across both rural and urban households.

• Equity managers remain cautious Janus Henderson’s Sat Duhra flagged weak nominal GDP and high interest rates as ongoing drags on corporate earnings.

Lessons from Previous Quarters

• July saw stronger manufacturing at 6%, lifting overall growth to 4.3%.

• Earlier quarters benefited from better FMCG demand and stronger household spending.

• Capex momentum from both private and government sectors supported growth in Jan–Mar 2025.

What the Data Signals

1. Fragile manufacturing cycle – factories facing weak orders and inventory mismatches.

2. Household demand under pressure – contraction in non-durables highlights consumption strain.

3. Mining & infrastructure as bright spots – but unable to drive growth alone.

4. Policy dependency – GST reforms, festive demand, and government spending are key levers.

5. Volatility persists – industrial recovery remains uneven and fragile.

   
   

Outlook for Next Quarter

• Upside drivers : Festive demand, GST-led price relief, restocking by retailers, and steady mining/infrastructure growth.

• Base case : Growth in the 3.5–5% range, with infrastructure continuing to outperform.

• Risks : Sluggish consumption, global trade headwinds, and inflationary pressures could weigh further on manufacturing.

Final Word

India’s industrial sector grew at a modest 4% in August 2025, with manufacturing weakness outweighing mining and infrastructure gains. The festive season now emerges as the next major test: a strong demand revival could lift momentum, but if consumption remains muted, growth risks tilting lower. The data underscores India’s dual-speed economy—resilient in investment-led sectors yet fragile in household consumption.