The Hindu Editorial Analysis
3 December 2025
Speed bumps ahead
(Source – The Hindu, International Edition – Page No. – 8)
Topic : GS 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment
Context
The third quarter is unlikely to offer much optimism for the economy.
Introduction
India’s latest economic data reflects a volatile performance, shifting from strong Q2 GDP growth to signs of emerging stress across sectors. While the impressive 8.2% GDP expansion initially boosted optimism, weak IIP numbers, slowing manufacturing, and declining export momentum reveal deeper vulnerabilities. Together, these indicators suggest that the economy’s recent highs may not be sustainable in the short term.
Economic Data Volatility: A Mixed Picture
- India’s recent economic data reflects a roller-coaster trend, moving from high optimism to emerging concerns.
- A strong Q2 GDP growth of 8.2% boosted government sentiment, despite low nominal growth and an IMF downgrade.
Industrial and Manufacturing Slowdown
- IIP growth fell sharply to 0.4% in October 2025, the lowest in 14 months.
- While GDP showed 9.1% manufacturing growth in Q2, IIP data revealed a slowdown to 1.8% in October.
- One reason is the low-base effect, as manufacturing grew only 2.2% in the same quarter last year.
- The more serious concern is the impact of U.S. 50% tariffs, which initially allowed older orders to be fulfilled but later caused a 12% contraction in exports in October.
Weakening Export Momentum
- The manufacturing PMI dropped to a nine-month low of 56.6 in November.
- New export orders grew at their slowest pace in over a year, pointing to rising tariff-related disruptions.
Sectoral Strain: Mining, Electricity and Primary Goods
- Winter weather reduced electricity output, while extended rains dragged down mining.
- Together, these factors led to a contraction in primary goods in October.
Investment and Capital Goods Concerns
- GDP indicated a 7.3% rise in investment in Q2, but IIP data hints at a Q3 slowdown.
- Capital goods grew just 2.4%, also a 14-month low, suggesting softer investment momentum.
Consumption Weakness After GST Rationalisation
- Despite GDP showing ~8% PFCE growth in Q2, IIP recorded a contraction in consumer durables and non-durables, marking their worst performance in two years.
- GST collections of ₹1.7 lakh crore in November indicate that demand has not strengthened as quickly as expected.
Overall Outlook
- Early indicators suggest that Q3 may remain subdued, with pressure from slowing exports, sectoral weaknesses, and softening consumption.
Conclusion
The early trends for Q3 highlight growing economic headwinds, marked by weakening exports, fragile industrial output, and slowing consumption despite earlier gains. With investment momentum also moderating, the overall picture signals a period of caution for policymakers. Sustained recovery will depend on stabilising external demand, improving domestic conditions, and ensuring that growth remains broad-based and resilient.