​Speedbreakers ahead: On India’s economic data

The last few days have shown just what a roller coaster of a ride India’s economic data can take. Last Friday’s robust Q2 GDP growth, a six-quarter high of 8.2%, lifted the government’s mood and brought cheer to its supporters. The relatively low nominal growth rate and grade by the IMF did little to dampen this feeling. However, the latest data on the Index of Industrial Production (IIP) and, to an extent, the manufacturing PMI are likely to do more in that regard. The IIP’s growth in October 2025 was just 0.4%, a 14-month low. While the GDP data for the July-September quarter showed the manufacturing sector growing 9.1%, the IIP showed the sector had slowed to a 14-month low of 1.8% in October. One of the possible reasons for this is that the GDP growth rate was boosted by a low base, since the sector had grown just 2.2% in the July-September 2024 quarter. The other, more troubling reason, is the impact of the U.S.’s tariffs. Merchandise exports grew in September, the first full month of 50% tariffs, as earlier orders were being fulfilled. They then contracted nearly 12% in October as the tariffs began to weigh on new order decisions. The PMI data, too, showed that the score for India’s manufacturing sector stood at a nine-month low of 56.6 in November. The report specifically mentioned that new export orders rose at their slowest pace in over a year, another sign that the U.S.’s tariffs were hurting.

While subdued exports likely weighed on the manufacturing sector, the change in weather towards winter and prolonged rains pulled down the electricity and mining sectors, respectively. As a result, the primary goods sector contracted in October. The GDP data had shown that investment had grown by a reasonably strong 7.3% in Q2. However, the IIP data suggest this could have slowed in the beginning of Q3 with the capital goods sector growing at a 14-month low of 2.4%. The IIP data also have some concerning news regarding household consumption. The GDP data showed that Private Final Consumption Expenditure grew at nearly 8% in Q2. However, the IIP showed that the consumer durables and non-durables sectors contracted in October, in aggregate their worst performance in two years. This was the first full month of data following the GST rate rationalisation. GST revenue of ₹1.7 lakh crore in November, reflecting economic activity in October, also shows that demand did not come rushing in as fast as the government would have liked. Taken together, multiple initial metrics are indicating that Q3 is not likely to be a cheerful quarter for the economy.