FALLING SHORT: ECONOMIC CHALLENGES

UPSC Relevance

GS-3: Indian Economy – Growth, manufacturing sector

GS-3: Economic Data – IIP, inflation, consumption, investment trends

Key Highlights

Declining Industrial Growth

Industrial production growth dropped to 2.9% in February, down from 5.2% in January and 5.6% in February 2024.

Sectoral declines:

• Mining: 1.6%
• Manufacturing: 2.9%
• Consumer Durables: -3.8%
• Non-Durables: -2.1%

IIP and Economic Context

February’s IIP hit a 14-month low in Manufacturing PMI (56.3).
Retail inflation fell to 3.61% (food inflation at 3.75%), but consumer demand remains sluggish. The government’s push for a Maha Kumbh-led consumption boost fell short.

Growth Areas

Manufacturing, accounting for 77% of IIP, showed:

• Motor vehicles: 8.9% growth
• Non-metallic minerals: 8%
• Basic metals: 5.8%
• Capital goods output jumped to 8.2% from 1.7%.

Policy Measures

RBI injected ₹2.18 trillion via dollar swaps to stabilize liquidity.
Global volatility caused a ₹1.7 trillion outflow from Indian banking.
The government remains hopeful for 2025 growth, despite missing the 6.5% GDP target.

Significance

Reflects weak consumer confidence and external uncertainties.
Manufacturing shows potential but requires consistent demand and investment.

Analysis & Way Forward

Implement reforms to boost consumer confidence, diversify exports, and manage global risks. Revive domestic demand through infrastructure and welfare investments.