April Industrial Growth Lower Than March. Capital Goods A Bright Spot

Satyaki Roy, Associate Professor at the Institute for Studies in Industrial Development (ISID), said, "For more than a decade now, the industries have not been investing proportionately to their profit margins. The continuous decline in the ratio of gross fixed capital formation to profit is evidence of that. Finally, there may be some amount of revival in investment again in a few sectors, as the initial trend suggests."

Quick estimates for the Index of Industrial Production (IIP) showed a 2.7 per cent year-on-year (YoY) growth in April 2025. The YoY growth in IIP in March 2025 was 3.0 per cent.

Though manufacturing IIP grew at 3.4 per cent — slower than the 4.2 per cent growth in the entire 2024-25 — what can come as some relief to policymakers is that it is still in a positive zone. The power sector shows signs of a slowdown, with a 1.1 per cent growth rate in April, while mining has experienced a negative 0.2 per cent IIP growth.

High Capital Goods IIP Growth

Industries are also classified based on the nature of their output and its use. Primary goods, capital goods, intermediate goods, infrastructure/construction goods, consumer durables, and consumer non-durables are the classifications for which the Ministry of Statistics and Programme Implementation (MoSPI) provides IIP data.

Here, the IIP for capital goods, which are mostly machinery and equipment used for industrial production, has grown by 20.3 per cent in April 2025. Earlier, capital goods slowed to 5.6 per cent growth rate in 2024-25, from 6.3 per cent in 2023-24.

A healthy growth in capital goods always signifies a rise in demand for machinery and equipment. In turn, this is a sign for higher future growth expectations of purchasing managers in companies across the industrial sector.

Manufacturing PMI (purchasing managers index) rose to 58.3 in May 2025, from 58.2 in March. So, the capital goods IIP growth result is consistent with the PMI figures. 

"There is a low statistical base effect also in play. Growth in the capital goods sector is indeed from a low base of 2.8 per cent in April 2024," Roy said.

Within manufacturing, the machinery and equipment segment grew by 17 per cent in April 2025, while related sectors, like motor vehicles, trailers, and semi-trailers, expanded by 15.4 per cent. Roy feels that the auto and related sectors went through a prolonged stagnation, and that is why there may be green shoots.

"Production-Linked Incentive (PLI) schemes may also have a role to play in the performance of capital goods in April. Though not a big investment, still PLI added to production capacity and possibly to the capital goods growth," he added.

He further said, "There are signs of new orders and investments in these segments, but those are not very broad-based, given the marginal slowdown in overall IIP growth."

However, there are worrying signals as well.

Industrial Raw Material & Consumer Non-Durables In Red

Primary goods, which are treated mostly as raw materials in the industry, have gone through a negative 0.4 per cent growth in April 2025. Overall, IIP growth in primary goods somewhat revived in 2024-25 at 6.1 per cent from 3.9 per cent in 2023-24.

So, the negative growth may be temporary in the month of April. If not, then a lack of demand for industrial raw materials does not bode well for the economy.

Consumer non-durables, which are mostly consumed by the common people in their day-to-day lives, have also shown a negative 1.7 per cent growth in April. After growing at 4.1 per cent in 2023-24, IIP growth rate for consumer non-durables hit a negative 1.5 per cent mark in 2024-25. It seems the negative momentum carried on in April.

IIP growth rates for intermediate, infrastructure, construction, and consumer durable goods, also showed signals of slowdown, consistent with the overall IIP results. The IIP growth rate in consumer durables, however, is relatively better, at 6.4 per cent in April 2025, though lower than 7.9 per cent in the entire 2024-25.

While the global economy goes through a trade turmoil and war exigencies, it is bound to affect any economy’s performance. India is no exception. However, India’s vast domestic consumer market can potentially buffer any such external shock.

Hopefully, the healthy rise in capital goods IIP growth points towards that.