June industrial growth falls to 10-month low of 1.5%
The Index of Industrial Production (IIP), which had risen 1.9 per cent in May and 4.9 per cent in June 2024, rose in June primarily due to the manufacturing sector – which makes up more than three quarters of the index – posting a 3.9 per cent year-on-year (YoY) rise in its output, up from 3.2 per cent in May, according to the data released on Monday by the Ministry of Statistics and Programme Implementation. Meanwhile, mining sector output contracted by 8.7 per cent, while electricity generation was down 2.6 per cent. In May, mining output had declined by 0.1 per cent, while that of electricity had fallen 4.7 per cent.
'The slowdown in IP growth in June was led by deeper contraction in the mining sector, shaving off 124 basis points (bps) from headline, even as both manufacturing and electricity generation added to headline IP. A high base effect was at play in the mining sector, aggravating the sharp sequential decline that the index witnessed in June vs May,' Barclays economists said in a note.
At 1.5 per cent, the June industrial growth figure takes the average for April-June to 2 per cent, the lowest in 11 quarters. In the first quarter of 2025, the average IIP growth was 3.9 per cent.
Industrial activity, particularly in the mining sector, was dampened in April-June due to excessive rains, which also cooled temperatures and reduced the demand for power. This was reflected in lower electricity generation.
As per the use-based classification, June saw capital goods output growth slump to 3.5 per cent from 13.3 per cent in May, while the production of primary and consumer non-durables continued to be lower compared to a year ago. On the other hand, output of consumer durables rose 2.9 per cent in June after shrinking by 0.9 per cent in May.
'On the demand side, signals remain mixed. Urban consumption, in particular, remains lagging. Nonetheless, consistent easing of inflation, a favourable monsoon, and recent policy rate cuts by the Reserve Bank of India are positives for the consumption scenario going forward. Against this backdrop, both demand and investment trends will need to be watched closely in the coming months,' CareEdge group chief economist Rajani Sinha said, adding that private capital expenditure is yet to show meaningful traction, although public investment continues to remain encouraging.
Production of intermediate and infrastructure goods rose at a faster clip in June compared to May. While intermediate goods output growth rose to 5.5 per cent from 4.7 per cent in May, that of infrastructure goods increased to 7.2 per cent from 6.7 per cent.
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