India’s Industrial Output Stalls at 0.4% in October, Raising Concerns About Economic Momentum

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Summary:

India’s industrial production rose just 0.4% in October 2025 its slowest pace in over a year well below expectations, highlighting strain on manufacturing ...

Industrial Growth Falters Sharply in October

India’s Index of Industrial Production (IIP) showed a marked slowdown in October 2025, growing just 0.4% year-on-year a 14-month low and a sharp drop from September’s 4% expansion. This performance also fell significantly short of the 3.1% consensus forecast in a Reuters poll. The figure reflects one of the weakest industrial performances since August 2024, raising questions about the durability of India’s economic momentum despite earlier signs of strength.

The Ministry of Statistics & Programme Implementation attributed part of the slowdown to the fewer working days in October due to major festivals such as Dussehra and Deepawali. While this seasonal explanation may hold some weight, the contraction across core sectors suggests more structural drag beyond holiday disruptions.

Manufacturing, Mining, and Electricity Sectors Under Pressure

A sectoral breakdown of the IIP data reveals divergent trajectories across India’s industrial landscape. Manufacturing, which constitutes the bulk of industrial output, grew only 1.8% in October, down from 4.8% in September. Mining activity reversed into negative territory, contracting by 1.8%. Even more striking was the collapse in electricity generation, which declined by 6.9% its steepest drop in several quarters.

These figures suggest that not only is industrial momentum weakening, but critical infrastructure-linked industries are facing broader headwinds. The drop in electricity output in particular may signal a slowdown in broader energy demand, a potential leading indicator of economic cooling.

GST Cuts and U.S. Tariff Shock Shape Mixed Backdrop

October was a pivotal month for India’s economic strategy. The government had introduced a series of goods and services tax (GST) reductions on September 22, aimed at stimulating consumption ahead of the festive season and cushioning the impact of a 50% tariff imposed by the United States on Indian exports.

While some improvement in domestic consumption was noted across key categories, it did not translate into stronger industrial output in the short term. The discrepancy between consumption trends and production levels suggests either that inventory was already elevated from pre-festival stocking in September, or that demand remains fragmented across sectors.

This highlights a key dynamic: while fiscal policy interventions can temporarily boost demand, they may not be sufficient to counteract trade disruptions or deeper production-side inefficiencies.

Short-Term Dip or Deeper Slowdown?

India’s Q3 GDP surprised to the upside, expanding 8.2% year-on-year, up from 7.8% in the previous quarter. However, the IIP data now casts doubt on the sustainability of that momentum heading into the final quarter of 2025. Industrial output is typically a leading indicator of broader economic activity, and its sharp deceleration could precede a cooling in overall growth if the trend persists.

The IIP index includes performance across eight core industries such as steel, cement, fertilizer, and electricity that account for 40% of the index’s weighting. A slump in these areas not only affects GDP but also signals weakened business confidence and investment intent.

Growth Momentum at Risk as Industrial Pulse Weakens

India’s industrial sector appears to have hit a stumbling block in October, with production growth nearly flatlining despite policy measures aimed at stimulating demand. While festive season distortions may have influenced the data, the steep drop in electricity and mining activity indicates deeper supply-side frictions or weakening underlying demand.

The government may need to weigh additional measures potentially on the infrastructure or credit side to sustain momentum into 2026. For now, investors and policymakers alike will closely watch November and December data to determine whether October's performance was a one-off dip or the beginning of a broader deceleration.

Source: CNBC

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