Industrial growth slows to 0.4 pc in October, raising doubts about GDP numbers

Growth in the Index of Industrial Production (IIP) slowed down to 0.4 per cent in October (year-on- year) – from two per cent in Q1 and 3.9 per cent in Q2 of FY26. Of its three components, the manufacturing IIP recorded a modest growth of 1.8 per cent, that of electricity IIP fell drastically by -6.9 per cent and mining IIP by -1.8 per cent.

The massive fall in the electricity IIP growth (-6.9 per cent in October) is a pointer to falling industrial activities. It had recorded -1.9 per cent growth in Q1 of FY26 and 2.7 per cent in Q2. The negative growth in the mining IIP in October can be attributed to the impact of monsoon but since it was also -3 per cent in Q1 and -0.3 in Q2, it should raise concerns.

Poor manufacturing IIP growth a concern

Of the three, it is the poor growth in the manufacturing IIP that would leave one worried. It had recorded a moderate growth of 3.4 per cent in Q1 and 4.7 per cent in Q2. This goes against the gangbuster growth in the manufacturing value-added (GVA) that led to surprisingly high economic growth in both Q1 and Q2.

Also read: Industrial output growth slows to 9-month low of 1.2 pc in May

Interestingly, the Ministry of Statistics & Programme Implementation (MoSPI) had held back the IIP data, scheduled for release on November 28, stating that it was doing so since the quarterly GDP data were to be released later that day.

The logic didn’t make sense then, but it does now.

The Q2 GDP numbers released on November 28 showed that the GDP grew at 8.2 per cent (GVA growth at 8.1 per cent), against the Reserve Bank of India's (RBI) projection of seven per cent. This was on the back of the surprisingly high growth in Q1 (GDP growth of 7.8 per cent and GVA growth of 7.6 per cent).

The MoSPI had attributed these surprising higher growths to the gangbuster growth in manufacturing GVA – growing at 7.7 per cent in Q1 and 9.1 per cent in Q2 – along with that of the services GVA.

Also read: IIP data: Indian exporters raced to ship goods in March, with eye on Trump tariffs

Since the growth in the services GVA has been pretty high for quite some time, it was the manufacturing GVA numbers that came as a surprise – in view of the moderate growth in manufacturing and general industrial output (IIP).

The GVA measures value addition in monetary terms, while output or IIP numbers reflect the volume of production. Logically, both GVA and IIP should move in the same direction because higher production would mean higher value addition.

But that doesn’t seem to be happening either in Q1 or Q2.

As against the galloping manufacturing GVA, the manufacturing IIP remains moderate.

Which numbers should one believe in?

Consider the core industrial production – eight infrastructure sectors of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity, all of which goes into the GDP/GVA estimates.

The core industrial growth was zero per cent in October, 1.3 per cent in Q1 and 4.4 per cent in Q2.

Also read: 8.2 pc growth puzzle: What the data misses about ground reality

So, if both the industrial IIP, its component manufacturing IIP and core IIP growth are moderate, how has the manufacturing GVA been growing so strong?

The following graph maps the misalignment in the output and value-addition numbers in Q1, Q2 and October 2025.

A look at the earlier years’ data show both the manufacturing IIP and core IIP are on a downward swing from FY22.

The GDP/GVA and industrial production data are provided by the MoSPI, while that of core industry is by the Ministry of Commerce and Industry – both of which are central government entities.

It is for the MoSPI to explain why the divergence is happening.

An aside.

The GDP/GVA data are part of the National Accounts Statistics which the MoSPI prepares and releases. On November 26, the International Monetary Fund put the NSA data in grade ‘C’ – one above the lowest category – red flagging the MoSPI’s methodology, quality and volume of data and rates and ratios.

This isn’t something new.

Former CEA's doubts on GDP

Former chief economic advisor (CEA) Arvind Subramanian had raised doubts about the GDP growth – beginning with his 2019 paper in which he said the GDP growth was overestimated by 2.5 to 3.7 percentage each year during FY12-FY17. The last time he raised such a doubt was in September 2023.

Many eminent economists have also questioned the GDP/GVA numbers, including Pronab Sen, Arun Kumar and Ashoka Mody.