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India’s Industrial Growth Slumps to 14-Month Low in October as Festive Calendar, Weak Output Drag Momentum

Industrial production expanded only 0.4% in October—its slowest pace since August 2024—raising concerns about a broader economic cooldown despite resilient domestic consumption. Key Takeaway India’s...

Dec 2
4 min read
India’s Industrial Growth Slumps to 14-Month Low in October as Festive Calendar, Weak Output Drag Momentum

Industrial production expanded only 0.4% in October—its slowest pace since August 2024—raising concerns about a broader economic cooldown despite resilient domestic consumption.

Key Takeaway

India’s industrial output nearly stagnated in October 2025, with the Index of Industrial Production (IIP) rising just 0.4%. Manufacturing growth weakened sharply, mining and electricity contracted, and a festival-heavy month reduced working days. Economists warn of external headwinds but note that strong consumption could cushion the slowdown.

Industrial Growth Hits a 14-Month Low

India’s industrial activity stumbled in October, with the latest data from the Ministry of Statistics & Programme Implementation (MoSPI) showing the IIP rising just 0.4% year-on-year. This marks a steep drop from 4% growth in September and falls below the 3.1% expansion forecast in a Reuters poll of economists.

MoSPI attributed part of the slowdown to a compressed number of working days, as Dussehra and Deepawali both fell in October, reducing production days across factories nationwide.

The latest reading is the weakest since August 2024, signalling that the post-pandemic manufacturing recovery remains uneven.

Sector Breakdown: Manufacturing Slows, Mining and Power Contract

Almost all key industrial segments lost momentum in October:

  • Manufacturing output rose 1.8%, far below September’s 4.8%.

  • Mining activity contracted 1.8%, reflecting weaker global commodity demand and disrupted operations around the festival period.

  • Electricity generation slumped 6.9%, the sharpest decline among the three sectors, partly due to lower industrial demand and milder weather conditions reducing household power usage.

These three sectors collectively determine the direction of overall IIP, with manufacturing alone accounting for nearly 78% of the index.

GST Rate Cuts Boost Consumer Demand

Despite the industrial slowdown, domestic consumption improved across major categories after the GST rate reductions on 375 items, effective September 22, 2025. Retailers and FMCG producers reported stronger festival-season sales, even as factories struggled to keep pace with output constraints.

Economists note that consumption-led demand may take time to fully translate into higher industrial production because many manufacturers were adjusting inventories from September’s stock build-up ahead of the October festival season.

External Pressure: U.S. Tariffs Add Headwinds

October was a pivotal month for India’s economy. The GST cuts were rolled out partly to buffer the impact of the United States’ 50% tariff imposed on a large set of Indian exports. While the tariffs hit overseas demand, India’s overall GDP still expanded faster than expected in the September quarter, rising above the previous quarter’s 7.8% growth (official Q2 figure referenced by the government in prior releases).

Analysts caution that export weakness may intensify in Q4 if global demand slows further.

Economists: Strong Consumption May Cushion the Weakness

Dipti Deshpande, principal economist at Crisil (a subsidiary of S&P Global), said the economy is entering a mixed period where robust domestic demand is offsetting sluggish exports.

She noted that rural incomes, moderating inflation, lower interest rates, and recent tax relief are all supporting consumer spending. “Sturdy consumption demand will help absorb part of the downturn in export-linked sectors between October and December,” she said.

However, Deshpande expects the government to scale back capital expenditure during the second half of FY26 to keep the fiscal deficit within target, especially as tax revenues—GST in particular—have been softer than anticipated.

Why IIP Matters

The IIP is a crucial high-frequency indicator that tracks short-term changes in production across industries. Eight “core” sectors, including steel, cement, electricity, refinery products, and fertilisers, make up 40% of the index’s weight, making it a key gauge of underlying economic health.

In September, IIP growth held steady at 4% as manufacturers increased output to build inventories ahead of the five-day festive season in October. That stockpiling effect reversed sharply in this month’s data.