The Union Bank of India (UBI) has released a report predicting a significant slowdown in India’s Index of Industrial Production (IIP) for April 2025. The IIP is expected to decline to 1.2% year-on-year, down from 3% in March, due to a broad-based slowdown in economic activity, particularly in the mining and manufacturing sectors. This is a significant drop from the 5.2% growth recorded in April 2024, indicating a slowdown in economic activity in the Indian economy.
The report attributes the anticipated slowdown to the spike in global trade uncertainty, particularly the reciprocal tariff hikes by the US, which is likely to affect exports. At least 30-35% of the weight in IIP is attributed to exports, which is expected to come under pressure until trade clarity is achieved. The Industrial Production data for April is scheduled to be released on May 28, providing insights into the country’s manufacturing momentum and economic activity.
The report cites several factors contributing to the anticipated slowdown, including mixed trends in high-frequency indicators, a decline in petroleum consumption, and a widening merchandise trade deficit. The construction sector has also witnessed a moderation in April, with steel consumption and cement production slowing down. The core sector, which has a significant contribution to the IIP, has slowed to an eight-month low of 0.5% year-on-year in April.
The report also anticipates a recovery in aggregate demand to remain weak, with overall consumer IIP expected to slip into the negative zone. Consumption demand is expected to be led by urban demand, while rural demand may have weakened further in April. However, capital goods IIP growth is expected to have improved in April due to favourable base effects. The report concludes that intermediate, infrastructure, and construction goods may have worsened in April compared to the previous month due to the fall in cement and steel production.
Overall, the report suggests that the Indian economy is experiencing a slowdown, driven by global trade uncertainty and a decline in exports. The anticipated decline in IIP for April 2025 is expected to be a significant drop from the previous year, indicating a slowdown in economic activity. The report’s predictions will be confirmed when the Industrial Production data for April is released on May 28.