Week in Numbers: Tracking India’s Economic Pulse

The war in West Asia had little impact on the Indian economy, with GDP growing by a faster-than-expected 7.8% in the January-March quarter. Growth was sharply above the consensus estimate of around 7.2%. The Indian economy had grown 8.0% a quarter ago and 7.0% a year ago. The expansion was led by 9.9% growth in the services sector, which accounts for more than 50% of the economy. Industry and agriculture grew 7.3% and 3.6%, respectively, during the quarter. On the demand side, government final consumption expenditure grew 7.1% in January-March, while growth in gross fixed capital formation jumped to 10.8%, the highest in the current GDP series, which has data for three years.

The sharply higher growth in the fourth quarter pushed India’s GDP growth in 2025-26 to a three-year high of 7.7%, up from the earlier estimate of 7.6%. Gross value added rose 7.9% in 2025-26, led by 9.3% growth in services and 8.5% in industry. The growth was driven by buoyant private consumption and capital formation at 7.7% and 8.2%, respectively.

 

Interestingly, on the same day that the National Statistics Office said the Indian economy grew at the fastest pace in three years, the Monetary Policy Committee of the Reserve Bank of India cut its forecast for India’s GDP growth in 2026-27 to 6.6% from 6.9% due to uncertainties emanating from the war in West Asia. The economy is projected to grow between 6.3% and 6.8% across the quarters in 2026-27.

 

The RBI raised its inflation projection for 2026-27 to 5.1% from 4.6%, driven by higher global energy prices amid the conflict. The rate-setting panel, which kept the policy repo rate unchanged at 5.25%, raised its forecast for all four quarters in 2026-27, with inflation projected to rise to 5.9% in October-December, near the upper tolerance level of the RBI’s medium-term target range of 2-6%. The central bank flagged elevated energy prices and the potential emergence of El Niño conditions as key risks.

 

The Indian government remained within its fiscal deficit target of 4.4% of GDP in 2025-26, primarily due to lower expenditure and a higher surplus transfer from the Reserve Bank of India. The fiscal deficit contracted 3.5% year-on-year to ₹15.91 trillion in 2025-26, accounting for 97.5% of the full-year’s target. The government’s total expenditure during the year, at ₹49.65 trillion, was ₹1.60 trillion lower than the original Budget estimate and ₹597 billion lower than the revised estimate. The government’s non-tax revenue was ₹960 billion higher than the Budget estimate as the RBI transferred a record ₹2.69 trillion as surplus for 2024-25. The capital expenditure was ₹520 billion lower than the Budget estimate for 2025-26.

Government tax collections rose 6.0% year-on-year to ₹40.24 trillion in 2025-26. The collections during the year were ₹2.46 trillion lower than the Budget estimate and ₹534 billion below the revised estimate. The collections fell sharply short of the Budget estimate, primarily due to a shortfall in income tax and goods and services tax collections. Income tax collections in 2025-26, at ₹12.41 trillion, were ₹1.97 trillion lower than the Budget estimate, while GST collections at ₹10.72 trillion were ₹1.06 trillion below the Budget estimate. The Budget for 2025-26 announced major income tax relief measures by exempting income up to ₹1.2 million from tax. The government had also restructured GST by cutting tax rates sharply during the year.

 

India’s private-sector manufacturing activity improved as firms resorted to precautionary stockpiling amid the war. Growth in the manufacturing industry was stronger than in April and higher than the flash estimate for May, led by increases in buying activity, new orders, and output.

The HSBC India Manufacturing Purchasing Managers’ Index rose to a three-month high of 55.0 in May from 54.7 in April and the flash reading of 54.3. Manufacturers reported the fastest expansions in new orders and output since February. In both cases, stronger increases were seen in the intermediate and capital goods categories, while consumer goods saw a slowdown. On the price front, the war in West Asia continued to exert pressure on cost burdens. The rise in input prices was the second strongest in the past 45 months.

 

 

Services sector activity improved for the second straight month, with the India Services PMI rising to a six-month high of 59.8 in May from 58.8 in April. Rising demand for freight, digital solutions, e-commerce, entertainment, and IT services boosted new business growth in May. New orders placed with Indian service providers rose to their highest level in six months in May, moving further away from the slowdown in March.

With both factory production and services activity rising, Indian private-sector output expanded at a faster pace in May. The HSBC India Composite PMI rose to a six-month high of 59.3 in May from 58.2 a month earlier.

India’s industrial production growth rose to a four-month high of 4.9% in April, according to the new Index of Industrial Production series with 2022-23 as the base year. Industrial production grew 3.2% a month ago and 5.7% a year ago. The growth was led by a 6.2% rise in the manufacturing sector, which accounts for 76.1% of the total weight of the Index of Industrial Production. Among the other sectors, output of mining and quarrying declined by 5.1%, while electricity & gas supply and water supply, sewerage & waste management rose by 4.9% and 6.6%, respectively.

 

 

Gross direct premiums of general insurers rose 8.7% year-on-year to ₹242 billion in May. Gross direct premiums in April-May rose 6.7% to ₹596 billion. State-owned New India Assurance Co. had the highest market share in premium income in April-May at 15.2%, followed by ICICI Lombard General Insurance Co. at 10.2%.

 

Electricity generation from conventional sources rose 7.4% year-on-year to 142.90 billion kWh in May. This is the fastest growth in electricity generation from conventional sources over the past 23 months. The sharp rise in electricity generation in May was led by an 8.7% increase in thermal power generation to 124.00 billion kWh. Hydropower generation, however, declined 4.0% to 10.74 billion kWh in May.

 

Goods and services tax collections contracted 3.4% year-on-year to ₹1.94 trillion in May as the government discontinued the GST compensation cess. This is the first time in six months that total GST collections have declined year-on-year. GST collections, net of refunds, declined 4.0% to ₹1.67 trillion. Excluding compensation cess, GST collections in May rose 3.2% to ₹1.94 trillion.

 

Urban consumer confidence weakened for the third consecutive time, with the Current Situation Index falling to 90.7 in May from 95.7 in March. This is the lowest level since July 2023. The Future Expectations Index declined to 118.7 from 120.2, the lowest since July 2023.

 

India’s foreign exchange reserves rose marginally for the week ended May 29. The reserves increased by $937 million to $682.32 billion, with foreign currency assets rising by $3.12 billion to $546.15 billion. The gold reserves fell by $2.19 billion to $112.60 billion as bullion prices eased.

 

Reservoir storage levels fell year-on-year for the first time in nearly two years as the onset of the southwest monsoon was delayed. As of June 4, live storage stood at 54.73 billion cubic metres, down 6% from a year ago. However, live storage stood at 30% of total capacity, 19% above the 10-year average. Reservoir storage levels had increased during the corresponding week last year as the monsoon had set in over Kerala on May 24.

 

 

Coming up

• June 12: Consumer Price Index for May
• June 15: Periodic Labour Force Survey for May 
• June 15: Trade data for May

Tailpiece 
India’s per capita income rose to ₹208,090 in 2025-26, up 7.9% from the previous year. In dollar terms, this translates to an annual income of $2,192.