Slowdown in August IIP broad based as manufacturing, capital goods, consumer durables dip: Economists 

Manufacturing and consumer non-durables were the laggards in India’s slowed industrial output, economists said after India’s industrial output recorded a 4% increase year-on-year in August.

“Growth in the Index of Industrial Production (IIP) slowed a tad to 4% on-year in August from 4.3% in July. Of the six use-based segments, one contracted, four slowed, and one picked up,” said Dharmakirti Joshi, Chief Economist, Crisil.

According to Aditi Nayar, Chief Economist at ICRA, despite a low base, the IIP growth unexpectedly eased to 4.0% in August 2025 from the upwardly revised 4.3% in July 2025, while printing below ICRA’s forecast (+5.5%) for the month.

“The slowdown was entirely led by manufacturing growth, which eased sharply to 3.8% from 6.0% in July 2025. In contrast, while mining output witnessed a year-on-year expansion after a gap of four months, growth in electricity generation inched up to a five-month high in the month,” she said.

Joshi noted that consumer non-durables shrank to degrow 6.3% vs 0.5%. In comparison, consumer durables (3.5% vs. 7.3%), capital goods (4.4% vs. 6.8%), intermediate goods (5% vs. 6.1%), and infrastructure and construction goods (10.6% vs. 13.7%) all softened relative to July. “Primary goods were a bright spot, growing 5.2% from -0.7%, led by mining (up for the first time in five months) and electricity.”

Nayar remarked that the growth in primary goods output accelerated to a seven-month high of 5.2% in August 2025, reflecting trends in mining and electricity generation, even as all five other sub-segments experienced a deterioration in their growth performance compared to July 2025.

“Notably, consumer non-durables witnessed the steepest contraction in eight months, while the growth in consumer durables halved to 3.5% from 7.3% in July 2025, which may reflect inventory management to avoid stranded taxes ahead of the GST rationalisation. The infrastructure/construction goods output rose by double-digits for the second consecutive month, suggesting that growth in construction activity is likely to have remained healthy,” she said.

According to Joshi, going forward, rising private consumption is expected to support industrial production. “So far, a copious monsoon, robust kharif sowing and benign inflation have supported the rural economy. The impact of excess rains on agricultural output will be monitorable,” he adds.

Joshi says that the urban economy will gain a boost from lower lending rates, income tax relief, and the rationalisation of the goods and services tax (GST). “The GST relief should benefit consumption but will be a function of the extent of passthrough.”

Nayar echoes Joshi’s sentiments. “Looking ahead, the GST rationalisation is expected to boost consumption demand during the festive season, which is likely to augur well for manufacturing output in September-October 2025, once the older inventories are off the shelves. While this may partly offset the adverse impact of the U.S. tariffs and penalties, an unfavourable base may constrain expansion in the IIP in these months,” she said.

Joshi also said that a slowing global economy means softer exports, and the tariffs imposed by the U.S. exacerbate that drag. “The impact of 50% U.S. tariffs on India will show up from September. A trade deal with the U.S., currently being negotiated, can help offset some of this impact. Overall, we expect India’s gross domestic product to grow 6.5% this fiscal, with downside risks,” he said.