The 'Index of Industrial Production (IIP)', one of the tools to measure manufacturing activity in the economy, has declined on a year-on-year (YOY) basis in August. This is the first decline in 22 months. After this, discussions have started once again on speculations of economic recession.

Why did the IIP fall?
IIP recorded a negative year-on-year growth of 0.1% during the month of August, while a strong growth of 10.9% was recorded in the same month last year. The factory output index has declined by 4.1% for the first time since October 2022. The government blamed excessive rain in August for this decline, which affected mining activities. Mining declined by 4.3%. Apart from this, power generation declined by 3.7%. While manufacturing production has increased by only 1%. Will this affect economic growth? If this decline continues, it may affect the economic growth of the financial year 2025. The Reserve Bank of India (RBI) expects the gross domestic product (GDP) to grow by 7.2% in FY 2025. This comes after a growth of 7% in FY23 and 8.2% in FY24. GDP growth was 6.7% in the first quarter of FY25. The RBI is betting on a rise in private consumption, thanks to better rural spending, higher credit flow from banks, capacity additions by manufacturers and continued government spending on infrastructure to drive growth. The central bank expects exports to pick up soon. 

Will the growth momentum continue in India? India remains the fastest growing economy among major economies despite some challenges such as a slowdown in factory production and export growth. For example, India is projecting GDP growth of 7.2%, while China is struggling to meet its 5% target. However, the Dragon has recently announced several stimulus measures to boost its sluggish economy. On the other hand, the US is growing at 3% and the UK at 0.5%.