India’s Economic Growth Slows Slightly in December: ICRA Report
India’s economy sent mixed signals as 2025 came to a close. According to the ICRA Business Activity Monitor, high‑frequency activity indicators slowed slightly in December compared with November, hinting at a modest slowdown in overall growth. Yet, at the same time, industrial output jumped 7.8% year‑on‑year, the fastest in over two years, led by manufacturing and mining.
In other words, while some areas of the economy are cooling off, key sectors are still showing strong performance. These December numbers are crucial for understanding where India’s economy is headed as we step into 2026.
India’s Economic Overview: What Happened in December 2025?
India’s economic data for December 2025 shows a mixed picture. On one hand, the ICRA Business Activity Monitor, a set of high‑frequency indicators, found that overall economic activity eased slightly in December, slowing to 10.3% year‑on‑year from 10.7% in November 2025.
Despite this moderation, the index remained in healthy double digits and showed improvements in 10 of its 16 constituent indicators such as auto output and electricity generation. ICRA notes this moderate slowdown was partly due to unfavourable base effects and a slight dip in exports.
At the same time, India’s industrial output data showed strong performance, with the Index of Industrial Production (IIP) rose 7.8% year‑on‑year in December 2025, the fastest pace in over two years. This beat economists’ expectations of around 5.5% and highlights robust manufacturing and mining activity.
This contrast slows overall activity from high‑frequency indicators but strong industrial output makes the December data important for assessing the near‑term economic trend.
What Do the High‑Frequency Indicators Show?
Did the overall economic momentum of India really slow in December?
Yes, according to the ICRA Business Activity Monitor, the pace of activity growth eased in December 2025. The index is made up of multiple indicators that track economic movement in near real time. The year‑on‑year growth in this monitor dipped slightly to 10.3% in December from 10.7% in November, though it stayed in double digits.
However, this slowdown was not broad‑based. More than half of the indicators, including auto production, vehicle registrations, fuel consumption, and electricity generation, actually improved compared with the previous month. This suggests that demand and output in key sectors remained strong even as overall momentum softened.
ICRA also noted that core output, a measure of eight key industrial sectors, rose to a four‑month high in December, although the improvement was driven largely by a few sectors such as coal and steel.
Industrial Output: Strength in Manufacturing and Mining
How did industrial production of India perform in December 2025?
Industrial production in India surged sharply in December 2025. Government data released on 28 January 2026 showed that the Index of Industrial Production (IIP) expanded by 7.8% year‑on‑year, marking the highest growth rate in more than two years. This performance surpassed economists’ expectations of around 5.5% growth.
The strong rise came from multiple sectors:
- Manufacturing output grew 8.1%, driven by sectors such as electronics, machinery, and consumer goods.
- Mining activity rose 6.8%, reflecting stronger extraction and industrial demand.
- Electricity generation climbed 6.3%, bouncing back from earlier declines.
- Consumer durables like cars and phones surged over 12%, indicating strong consumer demand toward year‑end.
Taken together, these figures signal robust output in key parts of India’s industrial sector. Even though cumulative industrial growth from April to December 2025 moderated to 3.9%, the December surge shows a strong year‑end rebound.
Why Is India’s Economic Growth Showing Mixed Signals in December 2025?
What explains the slight slowdown in high‑frequency activity?
There are several reasons:
- Unfavourable base effects: High activity in the same period last year makes year‑on‑year comparisons tougher.
- Exports weakened: Some export categories slowed, reducing a key economic driver in December.
- Shift in seasonal or festival effects: Timing of festivals and price expectations around GST changes may have affected some indicators.
Despite this moderation, many of the same indicators that slowed remain above long‑term growth norms, suggesting underlying economic demand is intact.
Why did industrial output stay so strong?
Industrial strength came from strong manufacturing and consumer durables growth, likely supported by:
- Restocking by firms after the festive season.
- Continued demand for vehicles, electronics, and infrastructure‑related goods.
- Policy support and GST rationalisation encouraging production.
This divergence slows broader indicators but strong industrial output could indicate that production is picking up before other parts of the economy fully follow.
What Do Forecasts Say About Future Growth?
Will India’s economy continue growing strongly in 2026‑27?
Official projections remain positive. The Economic Survey 2026, tabled in Parliament in late January 2026, projects India’s GDP to grow between 6.8% and 7.2% in the fiscal year 2026‑27 (April 2026-March 2027). This suggests a modest slowdown from the estimated 7.4% growth in the current fiscal year but still solid performance for a major economy.
Economists and corporate leaders also generally expect India’s growth to remain within the 6.5-7% band in the coming year, despite headwinds from global uncertainty and slow export demand.
Analysts from rating agencies like CareEdge even see growth around 7% amid external volatility, citing strong domestic demand and low inflation as supportive factors.
Separately, the International Monetary Fund (IMF) recently forecast that India’s growth for FY26 may be slightly higher than earlier estimates, lifted by resilient domestic activity.
What Does This Mean for Policy & Markets?
The mixed data has clear implications:
- Monetary policy: The Reserve Bank of India (RBI) is expected to keep interest rates steady in 2026, balancing growth and inflation risks.
- Currency pressures: The Indian rupee hit record lows against the U.S. dollar recently, reflecting capital outflows even amid solid growth.
- Investment markets: Strong industrial output gives sectors like manufacturing and consumer goods stocks a boost, and tools like AI‑based stock analysis can help investors interpret these macro trends with more precision.
Final Words
December 2025’s economic data shows mixed signals. The slight slowdown in high‑frequency indicators, as highlighted by the ICRA Business Activity Monitor suggests some moderation in headline momentum. However, robust industrial output growth of 7.8% paints a more optimistic picture for core economic activity.
Looking ahead, projections for FY2026‑27 remain positive, with growth expected near 7% despite global challenges. What’s clear is that India’s economy continues to show resilience and adaptability, even as individual indicators fluctuate.
Frequently Asked Questions (FAQs)
India’s economic growth slowed slightly to 10.3% in December 2025. The drop was due to tough comparisons with last year, slower exports, and seasonal changes in demand.
India’s industrial output rose 7.8% in December 2025, the fastest in over two years. Manufacturing, mining, and electricity sectors led the growth, showing strong production activity.
India’s GDP is expected to grow 6.8-7.2% in FY2026‑27. Growth remains solid despite some slowdowns, supported by strong domestic demand and manufacturing output.
Disclaimer
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