The Hindu Editorial Analysis
30 July 2025
Interrupted growth
(Source – The Hindu, International Edition – Page No. – 8)
Topic : GS 3 – Economy
Context
Government infrastructure spending remains a key driver of industrial growth.
Introduction
The recent slowdown in the Index of Industrial Production (IIP) highlights how climate-related disruptions, especially erratic monsoon patterns, are affecting core sectors like mining and electricity. Despite this, India’s economic data frameworks remain largely detached from climate attribution. As extreme weather becomes more frequent, integrating climate risk into economic reporting is no longer optional—it’s essential.
Sluggish Industrial Growth: Key Highlights from June’s IIP
- Overall Industrial Growth:
- June 2025 saw a 10-month low IIP growth of just 1.5%, compared to stronger performance in recent months.
- This deceleration was primarily driven by declines in mining and electricity production.
- Mining & Electricity Output:
- Mining output fell by –8.7%, a sharp drop from +10.3% in June 2024.
- Electricity generation contracted by –2.6%, as against +8.6% a year ago.
- Reason for the Decline:
- The early and erratic monsoon led to waterlogging in key mining regions—Odisha, Jharkhand, and West Bengal.
- Example: Jharkhand received 504.8 mm of rainfall between June 1 and July 12 (normal: 307 mm), though five districts were still rain-deficient.
- Power distribution infrastructure suffered, further disrupting supply chains and lowering demand.
Mixed Picture Across Industrial Segments
- Overall industrial output rose modestly by 3.9% in June, a slight improvement over 3.5% in June 2024.
- Positive contributors to growth included:
- Capital goods: +3.5%
- Intermediate goods: +5.5%
- Infrastructure goods: +7.2%
- This suggests that government-led infrastructure spending is a key driver of industrial activity.
- Mining and electricity, together, account for 22.3% of IIP’s weightage, with the rest from manufacturing.
Climate Disruptions: Still Missing from Official Economic Narratives
- Institutional reluctance persists in linking economic slowdowns to climate events, despite growing evidence.
- Official data explanations often cite:
- High base effects
- Supply chain issues
- Input cost fluctuations
- Global demand softness
- Weak domestic consumption
- Climate-induced disruptions, such as monsoon-triggered mining slowdowns, are rarely acknowledged.
- Global comparison:
- Institutions like the European Central Bank and Bank of England are incorporating climate risk in output and financial stability metrics.
- In contrast, Indian agencies like MoSPI and RBI have been slower to adopt such frameworks.
- Challenges in climate attribution:
- Requires scientific modelling and probabilistic analysis.
- Policymakers may avoid such links to prevent politicisation of economic data.
- Current progress:
- RBI’s Financial Stability Reports now include climate risk.
- But production-side metrics like the IIP still lack climate-related analysis.
The Way Forward
- There is an urgent need for India to integrate climate risk assessment into macroeconomic indicators like the IIP and GDP.
- Doing so will enhance:
- Policy planning
- Resilience to environmental shocks
- Transparency in economic data
- A systemic shift toward climate-aware economic reporting is both necessary and long overdue.
Conclusion
India must make a systemic shift in its economic reporting by recognizing the economic impact of climate events. Ignoring climate risk in indicators like the IIP limits both policy response and public understanding. As global institutions advance in climate-linked macroeconomic analysis, India must also evolve to ensure resilient growth in an increasingly climate-volatile world.