Early monsoon dampens mining, power demand as industrial output slows to 9-month low of 1.2% in May

The Index of Industrial Production (IIP) eased to a nine-month low of 1.2% in May 2025 from 2.6% in April 2025, according to the latest data shared by the Ministry of Statistics & Programme Implementation (MoSPI). Along with the quick estimate of IIP for May 2025, the indices for April 2025 have also undergone final revision in light of the updated data received from the source agencies.

"The early onset of the monsoon doused activity in mining and the demand for electricity, with both these sub-sectors of the IIP reporting a contraction in May 2025, amidst an anaemic growth of manufacturing. Moreover, the underlying trends were uneven, with three of the use-based categories displaying a contraction, amidst a continued high 14.1% expansion in capital goods, boosted by a low base. Tepid industrial volume growth in the first two months of the quarter doesn't augur well for industrial GVA growth in Q1 FY2026," Aditi Nayar, Chief Economist, ICRA Ltd.

Dharmakirti Joshi, Chief Economist, CRISIL says the IIP grew at its slowest pace in May 2025 since August 2024, indicating a weak first quarter so far for industrial activity. "Lower borrowing costs following the Reserve Bank of India’s rate cuts and income tax relief for salaried workers will also help revive urban demand. Global risks remain high as the tariff pause nears its end. The universal tariff hike and sectoral tariffs on autos, steel and aluminium are already in place. S&P Global forecasts global growth to slow to 2.9% in calendar 2025 from 3.3% in the previous year."

Meanwhile, Crisil projects India’s gross domestic product to expand 6.5% this fiscal, with risks tilted to the downside amid external headwinds.

Key Highlights:

1. The IIP growth slowed to 1.2% in May 2025, down from 2.7% in April 2025, on weak growth in the electricity and mining sectors. Sector-wise, the manufacturing sector grew 2.6%, while mining contracted marginally by 0.1% and electricity declined sharply by 5.8%.

2. The overall IIP stood at 156.6 in May 2025, compared to 154.7 in May 2024. The sectoral indices for the month were 136.3 for mining, 154.3 for manufacturing, and 216.0 for electricity.

3. Within the manufacturing sector, 13 out of 23 industry groups at the NIC 2-digit level recorded positive growth over the same month last year.

4. The top contributors were manufacture of basic metals (6.4%), machinery and equipment n.e.c. (11.8%), and other non-metallic mineral products (6.9%). Growth in basic metals was driven by products such as MS blooms, billets, slabs, and flat products of alloy steel.

5. In machinery and equipment, key contributors included decanter centrifuges, various types of pumps, and non-vehicle internal combustion piston engines.

6. As per the use-based classification, the indices stood at 157.9 for primary goods, 120.1 for capital goods, 168.1 for intermediate goods, and 198.1 for infrastructure/construction goods. The indices for consumer durables and non-durables were 129.3 and 150.3, respectively.

7. The corresponding growth rates for May 2025 over May 2024 were -- 1.9% for primary goods, 14.1% for capital goods, 3.5% for intermediate goods, and 6.3% for infrastructure/construction goods.

8. Consumer durables declined by 0.7%, while non-durables saw a sharper drop of 2.4%. Based on this classification, the top three positive contributors to IIP growth in May 2025 were capital goods, infrastructure/construction goods, and intermediate goods.