Week in Numbers: Tracking India’s Economic Pulse

Manufacturing activity in India slowed sharply in July as renewed tensions in West Asia following the collapse of a fragile truce weighed on business conditions. The HSBC India Manufacturing Purchasing Managers’ Index fell to a five-year low of 53.5 in July from 54.2 in June, as growth in total sales, new orders, and input purchasing moderated. The latest reading was the lowest since August 2021 and fell below the long-run series average of 54.2, marking the first time in more than four years that the headline PMI had slipped below its long-run average.

Growth moderated across several indicators, including total sales, input purchasing and employment. Although growth in new orders eased only marginally from June, it was the second-weakest in more than four years. Firms continued to increase production as sales rose, but the pace of growth was little changed from June and remained among the weakest since mid-2022.

Renewed tensions in West Asia cast fresh doubts on the durability of recent improvements in supply chains. Manufacturers were probably rebuilding inventory buffers, with stocks of both inputs and finished goods increasing alongside purchasing volumes. This suggests that firms were securing supplies and seeking to limit their exposure to potential disruptions.

Service-sector activity also lost momentum, with business activity rising at the weakest rate in 53 months. New business inflows increased only moderately amid reports of softer demand, competitive pressures, and fewer enquiries.

The seasonally adjusted HSBC India Services PMI fell to a four-and-a-half-year low of 53.3 in July from 57.4 in June. New business inflows also expanded at the slowest pace since February 2022. Survey respondents said growth was constrained by fierce competition, fading demand, softer market conditions, and order postponements.

The HSBC India Composite PMI fell to 54.3 in July from 57.1 in June, signalling the weakest pace of expansion since March 2022. Although new orders and output continued to increase across India’s private sector, the pace of expansion eased in both manufacturing and services. The slowdown was particularly sharp in the services sector, while factory output growth edged up marginally. At the composite level, the rate of expansion in July was the weakest in 53 months.

Growth in India’s retail automobile sales accelerated in July, driven by gains across all major segments and a statistical effect of a low base. Total sales grew 25.9% year-on-year to 2.59 million units. This is the fastest year-on-year growth in retail automobile sales in nine months. Total sales had grown 23.6% in June 2026 and 0.3% in July 2025. Automobile sales in the country have remained buoyant since the government cut goods and services tax rates in September.

Two-wheeler sales grew 28.3% year-on-year to 1.82 million units, while passenger vehicle sales increased 19.1% to 416,555 units in July. Commercial vehicle sales grew 24.0% to 99,666 units in July, while three-wheeler sales rose 16.2% to 133,778 vehicles.

Growth was relatively even in urban and rural areas, with the latter growing slightly faster. Total sales in urban areas increased 23.8% year-on-year compared with 27.9% in rural areas. Rural areas accounted for 52.5% of total sales, compared with 47.5% in urban areas.

The Reserve Bank of India’s economic forecasts suggested that the outlook for the Indian economy improved marginally since June. The Monetary Policy Committee of the RBI raised its forecast for India’s GDP growth in 2026-27 by 10 basis points to 6.7% as supply-side pressures caused by the West Asia conflict eased somewhat since June. The RBI has projected quarterly growth of 6.4%-7.0% during the year.

 

The committee cut its inflation projection for 2026-27 by 10 basis points to 5.0%, as generalised inflation pressures have remained modest so far during the year. The MPC, which kept the policy repo rate unchanged at 5.25%, cut its forecast for the current quarter but raised it for January-March. The committee expects inflation to rise to 5.9% in October-December, near the upper tolerance limit of 6% under the RBI’s inflation-targeting framework, before falling to 5.4% in January-March and 5.3% in April-June.

 

Electricity generation from conventional sources continued to grow strongly in July, led by a sharp increase in thermal power output. Power generation rose 7.3% year-on-year to 143.92 billion kWh in July. In absolute terms, this is the second-highest monthly generation on record. Growth in electricity generation from conventional sources had risen to a two-year high of 8.3% in June.

The increase in electricity generation was led by a 12.1% increase in thermal power generation to 119.29 billion kWh and an 18.6% rise in nuclear power generation to 5.38 billion kWh. Hydropower generation, however, declined 18.2% to 17.74 billion kWh in July.

Petroleum product consumption rose year-on-year for the first time since the war began in West Asia. Petroleum product consumption rose 2.9% to 19.92 million tonnes in July, pulled up by a rise in petrol and diesel sales despite the increase in retail prices in May. Consumption of petrol rose 9.2% to 3.82 million tonnes, while diesel increased 10.0% to 8.09 million tonnes. Liquefied petroleum gas consumption continued to decline due to supply disruptions. LPG consumption declined 16.4% to 2.35 million tonnes in July.

 

Urban consumer confidence weakened for the fourth consecutive round, with the Current Situation Index falling to 88.3 in July from 90.7 in May. This is the lowest level since July 2023. Consumer optimism for the year ahead remained in positive terrain but continued to moderate. The Future Expectations Index declined for the fourth consecutive round, falling to 115.3 from 118.7. The Future Expectations Index is the lowest since November 2022.

 

Capacity utilisation in manufacturing rose to a one-year high of 77.4% in January-March from 75.6% in the previous quarter. On a seasonally adjusted basis, utilisation, however, eased marginally to 75.2% from 75.5%. Announcing the August monetary policy, RBI Governor Sanjay Malhotra said strong capacity utilisation, robust credit flow and the government’s continued thrust on infrastructure are expected to sustain investment activity.

 

New business premiums of life insurers rose 20.7% year-on-year to ₹470 billion in July, led by state-owned Life Insurance Corporation of India. LIC’s premium income rose 23.8% to ₹280 billion, while that of private life insurers rose 16.3% to ₹190 billion. During April-July, new business premiums grew 17.5% to ₹1.556 trillion, with private insurers’ premiums rising 23.0% and LIC's increasing 14.0%. LIC sold 4.54 million policies in April-July compared with 2.87 million by private insurers.

 

India’s foreign exchange reserves rose to a 12-week high as inflows under the Reserve Bank of India’s measures to attract foreign currency inflows began to reflect in reserves. Total reserves increased by $10.51 billion to $692.87 billion in the week ended July 31. Foreign currency assets rose by $8.75 billion to $564.68 billion, while gold reserves increased by $1.68 billion to $104.74 billion. According to the RBI, as of July 31, the measures had attracted inflows of $40.82 billion.

Reservoir storage increased sharply in the latest week but remained well below historical trends. As of August 6, live storage in reservoirs stood at 96.97 billion cubic metres, up 15.5 billion cubic metres from a week earlier. This is the largest week-on-week increase in a year. Live storage accounted for 53% of total capacity. However, the storage level was 27% below last year’s level and 3% lower than the 10-year average. Reservoir storage levels typically begin rising in June.

 

Southwest monsoon rainfall remained deficient. As of August 7, cumulative rainfall over the country was 451.9 millimetres, 89% of the long-period average. Of the country’s four regions, rainfall was 74% of the long-period average over east and northeast India, 82% over the south peninsula, 90% over northwest India, and 100% over central India.

The country received 106.8 millimetres of rainfall in June, or 63% of the long-period average, 283.3 millimetres in July, or 101% of the long-period average, and 60.9 millimetres in August 1-7, or 95% of the long-period average.

 

The shortfall in kharif sowing narrowed, but the area sown remained lower year-on-year as the southwest monsoon continued to be deficient. The total area sown under kharif crops fell 1.8% year-on-year to 96.79 million hectares as of August 7. Rice area, which typically accounts for about one-third of the total kharif cropped area, declined 4.4% to 34.48 million hectares. Sowing of pulses fell 1.8% to 10.38 million hectares, while oilseed acreage rose 3.0% to 18.02 million hectares. Sugarcane sowing, which is almost complete, declined 0.5% to 5.83 million hectares, while cotton area declined 0.4% to 10.60 million hectares. The area sown so far stood at 88% of the normal kharif area of 110.45 million hectares.

 

Coming up

• August 12: Consumer Price Index for July
• August 14: Merchandise trade data for July
• August 14: Wholesale Price Index for July
• August 14: Balance of Payments for June

 

Tailpiece

The Indian crude oil basket averaged $82.04 per barrel in July, down from $83.22 per barrel in June and $106.23 in May. However, with renewed hostilities in West Asia, the basket has averaged $85.55 per barrel so far in August.