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India’s industrial production showed signs of improvement towards the end of the last financial year, supported by a rise in high-frequency indicators such as the manufacturing Purchasing Managers’ Index (PMI), Goods and Services Tax (GST) collections, and e-way bill generations. A report by Bank of Baroda highlighted these positive trends while also cautioning about near-term challenges. It noted that the first quarter of the current fiscal year may witness some pressure due to uncertain global trade conditions. Export growth remains a key risk in the evolving scenario, despite domestic indicators showing some momentum.
High-Frequency Indicators Signal Late-Year Rebound
The Bank of Baroda report stated, “Given the latest improvement in manufacturing PMI for Mar’24, along with pick-up in e-way bill generations and GST collections, we expect production to have reported some improvement towards the end of the last fiscal year. In Q1 of the current fiscal year, some headwinds are appearing.”
The report added that the Reserve Bank of India’s move to reduce policy rates could lower borrowing costs, offering relief to the manufacturing sector. This development may encourage both production and investment activity.
External Factors Provide Temporary Support
The report also took note of the Trump administration’s announcement of a 90-day pause on the implementation of country-specific tariffs. Alongside this, softening global commodity prices are expected to support the manufacturing sector in the near term.
Despite these positive factors, recent industrial output data revealed mixed results. India’s Index of Industrial Production (IIP) growth slowed to 2.9 percent in February 2025, down from 5.6 percent in February 2024 and 5.2 percent in January 2025.
Broad-Based Decline in Output
The decline in output was broad-based across sectors. Mining and electricity recorded the most significant slowdowns, while manufacturing saw a more moderate dip. Within manufacturing, output declined in key industries such as basic metals, wearing apparel, chemicals, and motor vehicles. However, sub-sectors like pharmaceuticals, textiles, and computers/electronics posted improvements.
Only capital goods registered year-on-year growth under the use-based classification. Other categories, including primary goods, intermediate goods, infrastructure goods, consumer durables, and consumer non-durables, reported declines.
Overall, IIP growth for the fiscal year so far moderated to 4.1 per cent, compared to 6 per cent during the same period last year. While domestic indicators suggest a late recovery, trade uncertainty and global market volatility remain concerns for the sector’s growth outlook.
(With Inputs From ANI)
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