Key Points
Manufacturing drives 5.0% industrial growth in January
Government spending supports sector expansion
Petroleum and electrical equipment show significant increases
Capital goods and infrastructure contribute to positive trend
Out of 23 manufacturing industries, 19 recorded positive momentum, an improvement from 16 in the previous month. Additionally, higher government spending in January provided further support to industrial growth, and the outlook remains favourable for meeting budget targets.
Higher government spending played a crucial role in supporting industrial growth. The outlook remains positive for achieving budget targets, aided by resilient rural demand and non-oil exports.
While some moderation in activity was observed in February due to lower automobile and fuel sales, electricity demand and travel activity have shown an uptick.
Domestic growth is expected to gain further momentum, supported by tax incentives for urban India announced in the Budget and potential policy easing by the Reserve Bank of India (RBI). However, external risks, such as global tariff uncertainties, could impact India's export sector.
Industrial activity in India saw a strong boost in January 2025, driven by robust manufacturing growth. The Index of Industrial Production (IIP) grew by 5.0 per cent year-on-year (YoY) in January, an improvement from 3.5 per cent in December 2024. Manufacturing output increased by 5.5 per cent YoY, up from 3.0 per cent YoY in the previous month.
Petroleum products, the largest component of manufacturing, grew by 8.5 per cent YoY in January, compared to 3.9 per cent YoY in December. Other key industries also recorded strong growth.
Electrical equipment grew by 21.7 per cent YoY, fabricated metals by 10.5 per cent YoY, and basic metals by 6.3 per cent YoY.
Growth was also supported by strong performance in capital goods, infrastructure, and durable goods. Capital goods recorded a 7.8 per cent YoY growth, while infrastructure and construction goods expanded by 7.0 per cent YoY. Consumer durables saw a 7.2 per cent YoY increase.
Primary goods recorded their highest growth in six months at 5.5 per cent YoY, while cement production saw a notable increase of 14.5 per cent YoY. Consumer non-durables showed a recovery from a 26-month low of -7.6 per cent YoY in December 2024 to -0.2 per cent YoY in January 2025, largely due to increased tobacco production.
Electricity production remained weak at 2.4 per cent YoY in January, down from 6.2 per cent in December. However, early indicators suggest an improvement in February. Mining output increased by 4.4 per cent YoY, compared to 2.7 per cent in December, adding to the overall positive momentum.
