Industrial growth slows to 4% in August as manufacturing eases

Industrial output for August

India’s industrial production growth eased to 4 percent in August, compared with 4.3 percent in July, as a slowdown in manufacturing offset gains in mining and electricity. Official data show that manufacturing sector growth halved to 3.8 percent from 6 percent in the previous month.

Sector-wise performance

Mining emerged as the best performer, rising to a 14-month high of 6 percent after contracting 7.2 percent in July. Electricity output also improved modestly, growing 4.1 percent compared with 3.7 percent in the previous month.

“The slowdown was entirely led by manufacturing growth, which eased sharply to 3.8% from 6.0% in July 2025. In contrast, mining output witnessed a year-on-year expansion after a gap of four months, while growth in electricity generation inched up to a five-month high,” said Aditi Nayar, chief economist, ICRA.

Use-based trends

The announcement of GST reforms appears to have hurt consumer demand in August. Non-durable goods contracted to an eight-month low of 6.3 percent, while durable goods growth halved to 3.5 percent from 7.3 percent in July, reflecting inventory adjustments ahead of the new GST structure.

“Consumer non-durables witnessed the steepest contraction in eight months, while growth in consumer durables halved to 3.5%. This may reflect inventory management to avoid stranded taxes ahead of the GST rationalisation,” Nayar added.

Primary goods were the only segment to expand faster, rising 5.2 percent after contracting 0.7 percent in July. Infrastructure and construction goods remained a bright spot, growing 10.6 percent, while capital goods expanded 4.4 percent versus 6.8 percent in the previous month.

Outlook ahead

Economists expect the drag to persist in September, but see stronger momentum in the festive months.

“We could be expecting September to also be a less impressive month for IIP with consumer spending being held on to due to the prospective implementation of GST 2.0. Hence, growth will tend to bounce back in October and November and drive overall growth,” said Madan Sabnavis, chief economist, Bank of Baroda.