Factory output growth picked up pace marginally to rise sequentially to 3 per cent in March from a six-month low of 2.7 per cent in February, even as it stayed lower than 5.5 per cent growth seen in the corresponding period a year ago, primarily due to weak mining growth, data released by National Statistics Office (NSO) on Monday showed. For the full financial year 2024-25, factory output, as measured by the Index of Industrial Production (IIP) grew by 4 per cent as against 5.9 per cent in the previous year.
Economists said advancement of the IIP data release date could be one of the reasons for lower-than-expected print in March. The IIP data for March was the first release after the NSO announced the change in timing to 28th of every month instead of 12th earlier. The time lag for the release of the industrial output data has been reduced to 28 days from 42 days at present.
“The IIP growth for March 2025 came in slightly lower than our forecast of 3.3 per cent. It is possible that the lower response rate associated with the preponing of the data release has dampened the estimated growth rate, which may subsequently undergo a relatively larger revision as compared to that seen in the past,” Aditi Nayar, chief economist, ICRA said. She also said that while there is some evidence as well as commentary around frontloading in exports to the US, it needs to be seen whether this is driven by redirection away from other geographies or a bump up in output in the ongoing month.
As per the NSO, the quick estimate for IIP for a specific month will undergo revision only once, in the next month as the final estimate. Now, there will be only two estimates (quick estimate and final estimate) of a particular month instead of the earlier practice of releasing three estimates (quick estimates followed by a first revised estimate and second revised (final) estimate).
Manufacturing output, which accounts for 77.6 per cent of the weight of the IIP, picked up pace slightly to grow 3 per cent in March from 2.8 per cent in the previous month, even as it was lower than 5.9 per cent in the year-ago period. “In sequential terms, the improvement in growth of electricity and mild uptick in that of manufacturing was offset to a large extent by the dip in the growth of mining,” Nayar said.
Electricity output grew by 6.3 per cent in March from 3.6 per cent in February, but it was lower than 8.6 per cent in the year-ago period. Mining output growth slumped to 0.4 per cent in March from 1.6 per cent in February and 1.3 per cent in March 2024, the data showed.
Infrastructure industries performed well with 17-month high growth of 8.8 per cent in March over 7.4 per cent in the year-ago period. “…this can be attributed a lot to the frontend spending by the government on projects,” Madan Sabnavis, chief economist, Bank of Baroda said. The infrastructure goods output may have also gained from the year-end rush to meet capex targets both by state and union governments, Paras Jasrai, senior economic analyst, India Ratings and Research said.
Output of capital goods — an indicator of investment — also moderated 2.4 per cent in March from 8.2 per cent in the previous month and 7 per cent in the year-ago period. “Capital goods growth was subdued at 2.4 per cent with differential performance across machinery and motor vehicles being good while the category of ‘other transport equipment’ registering negative growth,” Sabnavis said.
Consumer durables output — an indicator of consumption demand — surged to 6.6 per cent in March from a 15-month low of 3.7 per cent in February despite a high base of 9.5 per cent growth in the year-ago period, an indication of the high consumer durables output amid the onset of the summer season and excess heat waves.
Consumer non-durables, which reflects fast-moving consumer goods, continued to be in the negative territory for the second straight month at (-)4.7 per cent in March as against (-)2.1 per cent in February and 5.2 per cent in the year-ago period. “The consumer non-durables are still in contractionary phase, with the output declining sharply by 4.7 per cent in March 2025. The positive spillover effects of significant ebbing of high food along with the monetary easing in February and April 2025, would be felt with a lag in FY26,” Jasrai said.
Going ahead, economists said a pickup in investment and consumption is likely to support industrial growth, while tariff risks from the US may impact exports. “Monitoring consumption trends remains critical, given the ongoing unevenness in the domestic demand landscape. Looking ahead, it will be critical to monitor global trade dynamics and geopolitical risks,” Rajani Sinha, chief economist, CareEdge Ratings, said.
