India’s Industrial Production YoY Slows Sharply to 0.40% in December 2025
Table of Contents
India’s Industrial Production (IP) YoY growth for December 2025 came in at a subdued 0.40%, sharply down from 4.00% in October and November, and far below the 3.60% consensus estimate, according to the latest data from the Sigmanomics database. This represents the slowest pace of industrial expansion since July 2023, when growth dipped to 0.30%. The slowdown reflects a broad-based deceleration across manufacturing and mining, with utilities providing limited support.
Drivers this month
- Manufacturing growth slowed to 0.20% YoY from 3.80% in November.
- Mining contracted by 0.50%, reversing prior gains.
- Utilities rose modestly by 1.10%, cushioning overall output.
- Supply chain disruptions and energy price volatility weighed on production.
Policy pulse
The print arrives amid the Reserve Bank of India’s (RBI) recent monetary tightening cycle, with policy rates raised by 75 basis points since August 2025 to combat persistent inflation above 5%. The slowdown in industrial output aligns with RBI’s objective to temper demand pressures but raises concerns about growth sustainability.
Market lens
Following the release, the Indian rupee (INRUSD) weakened 0.30%, while 2-year government bond yields rose 12 basis points, reflecting increased growth concerns. Equity markets reacted negatively, with the NSEI index falling 1.10% in early trading.
Industrial Production is a core macroeconomic indicator, closely linked to GDP growth, employment, and inflation trends. India’s IP growth averaged 3.40% YoY over the past 12 months, with peaks above 5% in early 2025 and troughs near 1% in mid-2025. The December print of 0.40% is a notable deviation from this average, signaling a potential inflection point.
Monetary Policy & Financial Conditions
The RBI’s tightening stance has increased borrowing costs, dampening investment and industrial activity. Credit growth to the industrial sector slowed to 6.50% YoY in November, down from 8.20% six months ago. Higher interest rates and tighter liquidity conditions are constraining capital expenditure.
Fiscal Policy & Government Budget
Fiscal stimulus remains moderate, with the government maintaining a disciplined budget deficit target of 5.90% of GDP for FY2026. Capital expenditure increased 8% YoY, supporting infrastructure projects, but overall fiscal support to industry is limited amid inflation concerns.
External Shocks & Geopolitical Risks
Global supply chain disruptions, elevated commodity prices, and geopolitical tensions in key trade corridors have pressured industrial inputs and exports. The recent slowdown in China’s industrial output and ongoing Russia-Ukraine conflict add uncertainty to export demand and raw material costs.
This chart signals a clear downward trend in industrial momentum, breaking a multi-month growth streak. The sudden slowdown suggests rising downside risks to India’s near-term economic expansion, warranting close monitoring of policy responses and external developments.
Market lens
Immediate reaction: The INRUSD depreciated 0.30%, while 2-year yields climbed 12 bps, reflecting heightened growth concerns. The NSEI index dropped 1.10%, signaling investor caution. Commodity-linked stocks such as RELIANCE underperformed amid fears of weaker industrial demand.
Looking ahead, India’s industrial growth trajectory faces multiple scenarios shaped by domestic and external factors.
Bullish scenario (25% probability)
- Global supply chains normalize, easing input bottlenecks.
- Monetary policy pauses or reverses tightening by mid-2026.
- Fiscal stimulus boosts infrastructure and manufacturing sectors.
- Industrial production rebounds to 4-5% YoY by Q2 2026.
Base scenario (50% probability)
- Monetary policy remains tight but stable.
- External demand remains subdued amid geopolitical risks.
- Industrial growth stabilizes around 2-3% YoY in early 2026.
- Gradual recovery in manufacturing offsets mining weakness.
Bearish scenario (25% probability)
- Global recessionary pressures deepen, reducing export demand.
- Inflation spikes force further monetary tightening.
- Industrial output contracts or stagnates below 1% YoY.
- Rising unemployment and corporate defaults increase.
Balancing these outcomes, policymakers must navigate inflation control without stifling growth. The RBI’s forward guidance and government fiscal measures will be critical in shaping the industrial sector’s near-term path.
India’s December 2025 Industrial Production YoY reading of 0.40% signals a marked slowdown from recent robust growth. This deceleration reflects tightening monetary policy, external shocks, and structural challenges. While the utilities sector showed resilience, manufacturing and mining faltered, raising concerns about the broader economic outlook.
Financial markets reacted swiftly, pricing in heightened growth risks. The RBI faces a challenging policy trade-off between taming inflation and supporting industrial activity. Fiscal policy remains cautiously supportive but limited in scope.
Long-run trends such as digitalization, green energy transition, and supply chain diversification could reshape India’s industrial landscape, but near-term headwinds warrant vigilance. Investors and policymakers should monitor incoming data closely for signs of stabilization or further deterioration.
Key Markets Likely to React to Industrial Production YoY
Industrial Production data is a bellwether for India’s economic health, influencing currency, bond, equity, and commodity markets. The following assets historically track or react strongly to IP releases, reflecting their sensitivity to growth and inflation dynamics.
- INRUSD: The Indian rupee often weakens on disappointing IP prints due to growth concerns and capital outflows.
- NSEI: India’s benchmark equity index reacts to industrial data as a proxy for corporate earnings prospects.
- RELIANCE: A major industrial conglomerate, its stock price correlates with industrial sector performance.
- BTCUSD: Bitcoin’s price can reflect risk sentiment shifts triggered by macroeconomic data surprises.
- USDINR: The inverse of INRUSD, USDINR rises on weak industrial data signaling economic slowdown.
Insight: Industrial Production vs. NSEI Index Since 2020
Since 2020, India’s Industrial Production YoY and the NSEI index have exhibited a strong positive correlation (~0.68). Periods of industrial acceleration, such as mid-2021 and early 2023, coincided with equity rallies, while IP slowdowns in mid-2022 and late 2025 aligned with market sell-offs. This relationship underscores the importance of industrial data as a leading indicator for equity market sentiment and valuation adjustments.
FAQs
- What does the Industrial Production YoY figure indicate for India?
- The Industrial Production YoY measures the annual growth rate of India’s industrial output, reflecting manufacturing, mining, and utilities performance. It signals economic momentum and influences policy decisions.
- How does the latest 0.40% IP growth affect India’s economic outlook?
- The sharp slowdown to 0.40% suggests cooling industrial activity, raising concerns about GDP growth and employment. It may prompt cautious monetary policy and fiscal support to sustain expansion.
- Why is Industrial Production important for investors?
- Industrial Production data impacts currency, bond, and equity markets by signaling economic strength or weakness. Investors use it to adjust risk exposure and forecast corporate earnings.
Takeaway: India’s December 2025 Industrial Production YoY growth of 0.40% marks a significant slowdown, highlighting rising headwinds from monetary tightening and external shocks. Policymakers and markets must carefully navigate this turning point to sustain growth without fueling inflation.
INRUSD – Indian rupee vs. US dollar, sensitive to industrial growth and capital flows.
NSEI – India’s benchmark equity index, tracks economic and industrial activity.
RELIANCE – Major industrial conglomerate, reflects sectoral performance.
BTCUSD – Bitcoin price, proxy for risk sentiment shifts post-data.
USDINR – Inverse of INRUSD, rises on weak industrial data.
December 2025’s Industrial Production YoY of 0.40% contrasts sharply with November’s 4.00% and the 12-month average of 3.40%. This marks a steep deceleration, reversing a three-month plateau near 4%. Manufacturing, the largest component, fell from 3.80% to 0.20%, while mining shifted from 1.00% to -0.50%. Utilities remained stable but insufficient to offset declines.
The chart below illustrates the volatility in India’s industrial output over the past year, highlighting the recent sharp drop amid tightening financial conditions and external headwinds.