India’s manufacturing sector needs policy assistance amid global turmoil

India’s Fiscal 2025 Industrial Activity and Economic Outlook

• India’s Index of Industrial Production (IIP) is at its lowest in the past four years at 4%, indicating a slowdown in industrial activity.

• The slowdown is attributed to uncertainties in the global economic outlook, tepid goods exports growth, lower than expected consumption demand growth, and a dip in private capital expenditure.

• The IIP grew in March to 3% from February’s 2.7%, mainly due to a rise in power production.

• The fall in the IIP from 5.9% (2023-24) to 4% (2024-25) indicates a decline in sectors like mining, manufacturing, and electricity.

• A degrowth of -1.6% in consumer non-durables from 4.1% in the previous year indicates an uptick in urban private consumption.

• High food inflation in the October to December quarter of the last fiscal strains rural consumption.

• The flat growth in goods exports in FY25 indicates strain on India’s MSME sector, which contributes about 45.8% in exports.

• India must ensure that the Bilateral Trade Agreement fortifies India’s nearly 60 million MSMEs to protect the over 250 million jobs that the sector provides.