May 2025 IIP Growth Feels the Pressure of Global Uncertainty

Understanding IIP and Why It Matters

The Index of Industrial Production (IIP) is a critical macroeconomic indicator, offering insights into the country’s industrial health and demand trends. It measures the output of various sectors such as manufacturing, mining, and electricity. In recent years, the Ministry of Statistics and Programme Implementation (MOSPI) has started releasing IIP data faster, allowing real-time comparison with inflation and other macro indicators.

For May 2025, India’s IIP slowed to 1.23%, compared to 2.57% in April 2025, reflecting both global and domestic pressures, especially in capital expenditure and trade.

IIP Winners and Losers: Sectoral Breakdown

Data Source: MoSPI

Mining, Manufacturing, and Electricity: What Drove the Fall?

• Mining IIP remained mostly flat compared to April 2025.
• Manufacturing IIP, which holds the highest weight in the index at over 64%, dropped from 4.0% to 2.6%.
• Electricity contracted sharply from 7.5% in March to -5.8% in May 2025.

Despite a positive month-on-month (MoM) IIP reading, the year-on-year (YoY) growth remains below historical trends.

Four Key Factors Behind IIP Weakness in May 2025

Capex Slowdown

Domestic capital expenditure slowed, particularly in the private sector, excluding defence-related spending. Additionally, reciprocal tariffs disrupted global trade flows and raised input costs, further denting industrial output.

Strength in Domestic Demand-Driven Sectors

The growth in sectors such as machinery, electricals, plastics, and automobiles reflects continued resilience in domestic consumption. These sectors were less reliant on exports and helped support IIP.

Weakness in Export-Oriented Sectors

On the flip side, sectors like textiles, pharmaceuticals, chemicals, and electronics - which heavily rely on exports - faced sluggish global demand and logistical barriers, leading to negative growth.

Early FY26 Trends

The cumulative IIP for April–May 2025 (first two months of FY26) stands at 1.8%, primarily supported by wood products, tobacco, vehicles, and electricals. Drag continues from the media, pharma, and chemical sectors.

Conclusion: Global Uncertainty Casts a Shadow on FY26 Industrial Growth

The subdued IIP data for May 2025 signals the tightening grip of global uncertainty on India’s manufacturing and export sectors. While domestic consumption is holding ground, the weakness in export-driven industries and a contraction in electricity output are areas of concern.

Going forward, a rebound in global trade sentiment and clarity on tariff regimes will be essential for India’s industrial sector to regain momentum.

Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or professional advice. Readers are advised to consult their advisors before making any financial decisions.