Week in Numbers: Tracking India’s Economic Pulse

India’s industrial growth accelerated to a 23-month high of 7.3% in June from a revised 5.0% a month earlier, driven by a sharp pickup in manufacturing and electricity and gas supply. Growth was also supported by a favourable base effect after industrial output had slowed to 2.2% in June last year.

The manufacturing sector, which accounts for 76.1% of the Index of Industrial Production, grew 7.8% in June compared with 5.2% in May, while the electricity and gas supply sector expanded 10.6% from 10.3% a month earlier. Water supply, sewerage and waste management — the new sector introduced in the new series — grew 6.1% in June compared with 5.5% a month earlier. The mining and quarrying sector remained weak, growing only 1.0% after contracting 1.4% in May.

Capital goods output expanded in double digits for the third consecutive month, rising 14.2% in June, although slower than the 15.5% growth recorded a month earlier. Production of consumer durable goods rose 7.7% in June, marginally lower than the 8.0% growth recorded in May. The sustained strength in capital goods and consumer durables suggested resilient investment activity and consumer demand.

Factory output under the new Index of Industrial Production series grew 5.8% in the April-June quarter, up from 3.4% in the corresponding period last year.

The Indian government’s fiscal deficit stood at ₹3.08 trillion in April-June, accounting for 18.2% of the Budget target of ₹16.96 trillion for the full year. Total expenditure rose 11.0% year-on-year to ₹13.57 trillion, while total receipts increased 11.5% to ₹10.49 trillion. Revenue expenditure rose 7.4% to ₹10.17 trillion in the first quarter, while capital expenditure increased 23.7% to ₹3.40 trillion.

The government’s fiscal deficit in June declined 45.6% year-on-year to ₹1.45 trillion, primarily because of a high base effect. The fiscal deficit had tripled on year in June last year after the government paid an additional instalment of tax devolution to states. The Centre had posted a fiscal surplus of ₹2.00 trillion in May after the Reserve Bank of India transferred a record surplus of ₹2.87 trillion.

The government’s gross tax collections rose 6.4% year-on-year to ₹3.76 trillion in June, driven primarily by direct tax collections, especially corporate tax. Direct tax collections rose 13.8% to ₹2.58 trillion, led by a 17.5% increase in corporate tax collections to ₹1.50 trillion.

Indirect tax collections declined 6.8% to ₹1.18 trillion in June, mainly because of a 24.8% fall in excise duty collections to ₹220 billion following the reduction in excise duty on petrol and diesel. Customs duty collections rose 33.1% to ₹175 billion during the month, driven by the increase in the import duty on gold to 15% from 6%.

Gross tax collections in April-June rose 3.7% to ₹9.01 trillion. The slower growth reflected an 11.0% year-on-year decline in goods and services tax collections to ₹2.65 trillion and a 22.4% contraction in excise duty collections to ₹431 billion. GST collections declined because the government discontinued the GST compensation cess and settled integrated GST dues earlier this year. The Union Budget projects gross tax collections to rise 9.4% to ₹44.04 trillion in 2026-27.

 

Goods and services tax collections rose 15.4% year-on-year to ₹2.11 trillion in July. However, the year-on-year comparison is not strictly like-for-like because this year’s collections include a portion of the erstwhile GST compensation cess that has been subsumed into GST rates following the government’s restructuring of the indirect tax regime. Net GST collections, after refunds, rose 15.8% to ₹1.56 trillion.

 

India’s annual inflation rate, based on the CPI for Industrial Workers, rose to a 28-month high of 4.76% in June from 4.72% a month earlier, largely due to higher food and beverage prices. Inflation based on the headline CPI Combined rose to an 18-month high of 4.38% in June.

 

 

Growth in India’s services sector slowed sharply in May from a month earlier, with fewer sub-sectors recording double-digit growth and fewer registering positive growth, according to the experimental Index of Services Production released by the Ministry of Statistics & Programme Implementation. Eight of the 19 services sub-sectors recorded double-digit growth in May, while 16 posted positive growth, compared with 14 and 18, respectively, in April.

Retail trade remained a bright spot, growing 13.3% year-on-year in May, while wholesale trade expanded a modest 3.7%. Among the 19 sub-sectors, accommodation and food services recorded the fastest growth at 27.4% in May, while information and broadcasting contracted 7.6%, the weakest performance. Together, these 19 sub-sectors account for about 60% of India’s services sector.

 

India’s services trade surplus increased to $17.89 billion in June from $15.72 billion a month earlier. Services exports rose 13.3% year-on-year to $36.37 billion in June, the fastest growth in over a year, while imports rose 16.2% year-on-year to $18.48 billion. Including merchandise trade, the overall trade deficit widened to $12.53 billion in June from $12.23 billion a month earlier.

 

Bank lending rates firmed marginally in June. The weighted average lending rate on fresh rupee loans rose 2 basis points to 8.53%, while the weighted average rate on fresh term deposits increased 16 basis points to 5.99%. Over the past six months, the weighted average lending rate on fresh rupee loans has risen 25 basis points, while the weighted average rate on fresh term deposits has increased 32 basis points. Since the start of the monetary easing cycle in February 2025, the weighted average lending rate on fresh rupee loans has declined by 80 basis points, compared with a cumulative 125-basis-point reduction in the policy repo rate. During the same period, the weighted average rate on fresh term deposits has fallen 63 basis points.

 

Growth in bank credit accelerated across the board in June. Non-food bank credit rose 18.3% year-on-year as of June 30, up from 17.4% a month earlier and 9.3% a year earlier. Personal loans, which account for roughly one-third of the total non-food credit, increased 15.8%, up from 15.4% a month earlier and 11.7% a year earlier. Credit to industry accelerated to 19.2% from 17.5% a month earlier and 6.3% a year earlier, while credit to services increased to 21.4% from 20.4% a month earlier and 8.8% a year earlier. Agricultural credit accelerated to 16.8% from 14.9% a month earlier and 6.8% a year earlier.

India’s foreign exchange reserves rose to a 10-week high as inflows under the Reserve Bank of India’s measures to attract foreign exchange began to lift reserves. Total reserves increased by $6.12 billion to $682.35 billion in the week ended July 24. Foreign currency assets rose by $4.87 billion to $555.93 billion, while gold reserves increased by $1.31 billion to $103.06 billion. According to the RBI, as of July 31, the measures had attracted inflows of $40.82 billion, including through the concessional forex swap facility for public sector entities raising external commercial borrowings and the facility under which the RBI covers hedging costs for banks mobilising foreign currency non-resident deposits.

 

Reservoir storage increased sharply in the latest week but remained well below historical trends. As of July 30, live storage in reservoirs stood at 81.48 billion cubic metres, up 11.0 billion cubic metres from a week earlier. Live storage accounted for 44% of total capacity. However, the storage level was 35% below last year’s level and 7% lower than the 10-year average. Reservoir storage levels typically begin rising in June.

 

 

The southwest monsoon rainfall improved in July, narrowing the overall deficit. As of August 1, cumulative rainfall over the country was 402.2 millimetres, 88% of the long-period average. Of the country’s four regions, rainfall was 71% of the long-period average over east and northeast India, 78% over the south peninsula, 88% over northwest India, and 106% over central India.

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

 

Shortfall in Kharif sowing narrowed but was still lower year-on-year as the southwest monsoon continued to be deficient. The total area sown under kharif crops fell 2.9% year-on-year to 89.42 million hectares as of July 31. Rice acreage, which typically accounts for about one-third of the total kharif cropped area, declined 2.2% to 30.15 million hectares. Sowing of pulses fell 6.3% to 9.52 million hectares, while oilseed acreage rose 0.7% to 17.23 million hectares. Sugarcane sowing, which is complete, rose 1.5% to 5.76 million hectares, while cotton area declined 2.4% to 10.35 million hectares. The area covered so far accounted for 81% of the normal kharif area of 110.45 million hectares.

 

 

Coming up

• August 3: HSBC India Manufacturing PMI for July
• August 3: HSBC India Services, Composite PMI for July
• August 12: Consumer Price Index for July 

Tailpiece
The share of direct taxes in the Centre’s overall tax collections has risen steadily over the past three decades, increasing to 58.1% in 2025-26 from 34.7% in 1997-98.