India's industrial momentum remains mixed in Oct'25 despite festive season, GST rate cut boost - BigMint

• Crude steel production remains stable, consumption stagnant
• Automobile retail sales surge 40% y-o-y on better affordability
• Merchandise exports shrink, deficit widens to all-time high

Morning Brief: India's industrial activity recorded mixed trends m-o-m across various segments in October, contrary to expectations of an across-the-board improvement, led by stronger consumption due to festive season demand and the roll-out of GST 2.0 reforms.

The Index of Industrial Production (IIP) grew just 0.4% y-o-y, according to provisional government data. This marks a 14-month low and is a sharp drop from September's 4.6%.

The government attributed the slower momentum to fewer working days because of festivals such as Dussehra, Diwali, and Chhath, while some media reports also suggest subdued export demand due to US tariffs as a possible cause.

Specifically, the mining sector witnessed de-growth of -1.8%, which deepened from September's -0.4. Manufacturing output slowed too, though it remained positive, at 1.8% in October as against 5.6% in September.

Key highlights of macroeconomic trends in Oct'25

Crude steel production remains stable m-o-m

Crude steel output remained stable m-o-m at 13.56 million tonnes (mnt) in October, while it increased by 9% y-o-y. Stagnant finished steel consumption (unchanged m-o-m at 13.4 mnt) could have made mills cautious about raising output significantly.

Meanwhile, crude steel production continued to rise y-o-y due to rapid infrastructure expansion.

Pig iron production declined by 4% m-o-m and 16% y-o-y, as a leading producer undertook a maintenance shutdown.

Steel exports rise y-o-y on EU demand

Indias steel exports fell by 14% m-o-m to 0.62 mnt in October, though, y-o-y, volumes increased 15%.

Indian exports gathered momentum in the second half of CY'25, as EU-based buyers stocked up on imports due to apprehensions regarding additional tax burdens following the January 2026 implementation of the Carbon Border Adjustment Mechanism (CBAM). This boosted exports in October y-o-y.

However, with the implementation date nearing and lack of clarity continuing on exact CBAM costs, buyers also withheld from sourcing imports, leading to an m-o-m fall.

Safeguard duty continues to slow down steel inflows

Steel imports declined by 22% m-o-m and 24% y-o-y to 0.62 mnt. The implementation of the safeguard duty, anti-dumping duties, and stricter BIS quality norms helped stem inflows y-o-y.

Iron ore imports jump on supply constraints

Indias iron ore imports grew 9% m-o-m and more than doubled y-o-y to 1.09 mnt. The extended monsoon hampered mining operations, leading to a shortfall of high-grade ore in key hubs such as Odisha. Consequently, steelmakers had to procure iron ore from overseas origins.

Coal production recovers m-o-m but remains lower y-o-y

Indias coal output recovered by 14% m-o-m, as the monsoon started its retreat. Coal India Limited (CIL) produced 56.38 mnt in October, a 15% increase m-o-m. Industrial demand also strengthened, as the festive and post-monsoon consumption phase began.

However, production fell 8% y-o-y, with a supply overhang leading to elevated inventories at both ports and power plants.

Coal imports plunge as thermal power generation slides

India reduced its coal imports by a significant 18% m-o-m and 22% y-o-y to 16.85 mnt. Non-coking coal imports in October dropped by nearly 7% m-o-m to 13.52 mnt due to cool weather, brought on by unseasonal rains. Coal-fired power generation also fell 3.5% m-o-m and 13% y-o-y to 96 billion units.

India's coking coal imports dropped 24% m-o-m to 4.7 mnt in October due to the persistent downtrend in steel prices and an 8% rise in coking coal prices since July.

GST cuts, festive season boost retail auto sales

Automobile production declined by 9% m-o-m and 3% y-o-y to 2.8 million units, while sales increased by 4% m-o-m and 3% y-o-y to 2.79 million units, shows SIAM data. Meanwhile, FADA reported a 40.5% y-o-y surge in retail sales to an all-time high of 4.024 million units.

The association attributed the significant growth to (1) festive demand, with both Dussehra and Diwali falling in the same month, and (2) better affordability following the implementation of the new GST framework. Passenger vehicle inventories were lower at 53-55 days against around 60 in September.

EV registrations also surged by 34% m-o-m and 12% y-o-y, buoyed by the same growth drivers. Notably, according to reports, the GST cuts narrowed the price gap between EVs and vehicles with internal combustion engines (ICEs).

Power demand wanes

Daily average power consumption slid by 12% m-o-m and 6% y-o-y. Primary contributors to this were (1) unseasonal rains due to the extended monsoon and (2) consequent cool or comfortable weather in several regions.

Merchandise exports shrink, deficit widens

India's merchandise exports during October totalled $34.38 billion, decreasing by 5% m-o-m and 12% y-o-y. The US tariffs are expected to have dented export momentum, with shipments down by 9% y-o-y to $6.3 billion. However, exports to the US were up by 15% m-o-m, as Septmber recorded a steeper 12% decline y-o-y.

Meanwhile, imports rose 17% y-o-y, fuelled by higher gold and silver inflows. As such, the merchandise trade deficit widened by 30% m-o-m and 54% y-o-y to a record peak of $41.68 billion in October.

GST collections pick up on festive demand

Gross GST revenue amounted to INR 1.96 trillion in October, showing an uptick of 4% m-o-m and 5% y-o-y. Consumer demand spiked following the announcement of GST reforms, while festive season sales also provided support.

The increase also reflects pent-up demand from September. Consumers had delayed purchases until the last week of September to take advantage of GST cuts and festive discounts.

Manufacturing PMI inches up

India's manufacturing PMI edged up by 3% both on m-o-m and y-o-y bases to 59.2 points. End-user demand was robust in the domestic segment, while the growth in new export orders moderated.

Manufacturers also built up raw material inventories at the fastest pace since May 2023, with confidence strong about the positive impact of the GST cuts. This led to expansions in output.

However, it should be noted that this marks a divergence from IIP trends.

Outlook

India's economy will remain robust in H2FY'25, as evidenced by the RBI recently raising the country's GDP forecast to 7.3%. The country delivered a superior Q2 performance of 8.2%.

However, from a short-term perspective, growth seems to have moderated in November. India's manufacturing PMI fell to 56.6 points in November, the lowest since December. Export orders grew at their slowest in over a year, indicating that the US tariffs have adversely impacted export demand. Additionally, the PMI release suggests that the GST rate cuts may not be sufficient to offset tariff headwinds.