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India: Industrial sector continues to decelerate in May
Latest reading: Industrial output increased 1.2% year on year in May (April: +2.6% yoy). The result marked the worst reading since August 2024, and a marked a continuation of the downtrend in growth seen so far this year. The reading also undershot market expectations. Manufacturing output growth deteriorated, although mining output dropped at a softer rate.
Meanwhile, annual average industrial production growth fell to 3.4% in May (April: +3.9%). This signals a worsening trend in the industrial sector.
Outlook: Our Consensus is for industrial output to expand slightly quicker than FY 2024’s robust rate in FY 2025. Divestment from China by Western multinationals—such as U.S. phone manufacturer Apple—will aid capital outlays on India’s industrial sector. A further boost will come from subsidies under the flagship ‘Production Linked Incentive’ (PLI) scheme, which aims to help Indian manufacturers produce advanced industrial goods such as semiconductors and pharmaceuticals, increasing the value added of their output. Rising U.S. tariffs pose a downside risk.
