Week in Numbers: Tracking India’s Economic Pulse

India’s private-sector activity moderated in June amid the war in West Asia and the sharp rise in crude oil prices. The HSBC Flash India Composite PMI eased to a three-month low of 57.4 in June from 59.3 in May, dragged lower by weaker services activity. The HSBC Flash Services PMI fell to a 17-month low of 57.3 in June from 59.8 in May, while the HSBC Flash Manufacturing PMI declined to 54.5 from 55.0 a month earlier.

 

The slowdown was broad-based across the manufacturing and services sectors. New order volumes continued to rise strongly in June, although the pace of expansion slowed to the weakest in three months. Businesses often cited competitive pressures, rising fuel prices, and gas shortages as headwinds to growth.

Private-sector companies registered month-on-month increases in expenses, often attributed to higher raw material prices. In particular, panellists cited higher costs for chemicals, food, fuels, gases, metals, and utilities. Even so, input cost inflation eased for the third successive month, reaching its lowest since January. Cost pressures remained more pronounced in manufacturing than in services.

Although Indian goods producers raised their selling prices more than service providers did, inflation rates softened in both cases. At the composite level, output price inflation was the weakest in six months. Anecdotal evidence suggested that some businesses were reluctant to raise their selling prices amid challenging demand conditions and competitive pressures.

Flash PMI readings have generally exceeded the final estimates in recent months, with the composite index averaging 0.4 points higher than the final reading over the past year.

Growth in output across the eight core industries slowed to a seven-month low in May, mainly due to contractions in the energy and fertiliser sectors. Output across the eight core industries – coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity – slowed to 0.5% year-on-year in May, down from a revised 1.8% in April.

Output of five of the eight sectors – coal, crude oil, natural gas, refinery products, and fertilisers – contracted year-on-year in May, reflecting disruptions to India’s core industries caused by the war in West Asia. The output of these five sectors had also contracted year-on-year in April.

Output of steel, cement, and electricity remained relatively robust in May, growing at 5.0%, 8.4%, and 8.7%, respectively. These three sectors have been the main drivers of core sector growth in recent months.

 

 

Net foreign direct investment in India jumped to a near five-year high of $6.58 billion in April, primarily driven by a sharp rise in gross FDI inflows. Net FDI was at $0.92 billion in March and $1.59 billion in April last year.

Gross FDI inflows rose to a 67-month high of $15.29 billion in April from $6.63 billion in March and $9.26 billion a year ago. Repatriation in April increased marginally to $3.90 billion from $3.16 billion a month earlier, while overseas investments by Indian firms rose to $4.82 billion from $2.56 billion.

However, overall foreign investment flows recorded a net outflow of $680 million in April, compared with $13.39 billion in March, as there was net portfolio investment outflow of $7.26 billion in April, down $14.31 billion in March.

 

Financial performance of private companies improved in 2025-26, with sales rising in double digits, after recording single-digit growth in the previous two years, according to a Reserve Bank of India study of 4,278 listed private non-financial companies. Overall sales of the companies increased 10.1% in 2025-26, up from 7.2% in the previous year, led by growth in the manufacturing and non-IT services sectors.

Sales of manufacturing companies expanded 10.8% in 2025-26, up from 6.0% in the previous year, mainly driven by the automobiles, electrical machinery, food and beverage, and chemicals industries. Sales growth at IT companies inched up to 7.9% from 7.1% in 2024-25, while that of non-IT services companies jumped to 12.9% from 11.4% a year earlier.

Raw material expenses for manufacturing companies rose by 12.0% during 2025-26, with the raw material-to-sales ratio increasing to 57.6% from 55.7%, indicating input cost pressures. Staff cost rose by 10.7%, 6.1%, and 9.0% during 2025-26 for manufacturing, IT, and non-IT services companies, respectively.

Despite higher input costs, the operating profit growth of manufacturing companies improved to 10.3% in 2025-26, up from 6.0% in the previous year. Within the services sector, operating profit growth for non-IT services companies decelerated to 7.1% in 2025-26, while IT companies’ operating profit growth improved to 10.7%. Operating profit margins declined by 30 basis points to 13.9% for manufacturing companies and by 210 basis points to 20.0% for non-IT services companies in 2025-26, while improving by 50 basis points to 22.4% for IT companies.

Renewable energy generation, excluding large hydroelectric projects, rose 29.9% year-on-year to 34.57 billion units in May, driven by a 50.9% jump in solar energy output to 21.58 billion units. Wind generation increased 7.4% to 11.46 billion units. Electricity generation from large hydro projects contracted 3.9% to 12.75 billion units. Including large hydroelectric projects, renewable energy generation rose 18.7% to 47.32 billion units in May.

Total electricity generation in May, including thermal and nuclear sources, increased 11.2% to 177.56 billion units. Renewable sources accounted for 26.7% of total electricity generation in May, up from 25.0% a year earlier, continuing their rising share in the power mix.

The rupee weakened on a real effective basis in May, largely reflecting a pronounced depreciation in the nominal effective exchange rate, which outweighed the offsetting effect of India’s relatively higher inflation compared with its major trading partners. The 40-currency trade-weighted real effective exchange rate index fell to a near 13-year low of 89.21 from 90.97 in April. The Indian rupee depreciated 0.1% against the dollar in May.

 

India’s foreign exchange reserves increased as gold prices rose. The reserves increased by $962 million to $672.59 billion for the week ended June 19. Gold reserves increased by $4.11 billion to $107.93 billion, while foreign currency assets fell by $3.07 billion to $541.22 billion. India’s foreign exchange reserves are likely to rise significantly in the coming weeks as the Reserve Bank of India and the government have announced several measures to attract foreign flows, including a concessional forex swap for external commercial borrowings raised by public sector units and hedging costs for banks offering foreign currency non-resident accounts.

 

 

Reservoir storage levels continued to decline as the southwest monsoon remained sharply below normal in most parts of the country. As of June 25, live storage in reservoirs was at 48.41 billion cubic metres, equivalent to 26% of total capacity and 27% lower than a year ago. However, live storage was 6% above the 10-year average. Typically, reservoir storage levels start rising in June.

 

 

The southwest monsoon has remained significantly below normal so far. As of June 27, cumulative rainfall over the country was 43% below normal at 80.4 millimetres. Of the country’s four regions, rainfall was 27% below normal over northwest India, 44% below normal over east and northeast India, 57% below normal over central India, and 30% below normal over the south peninsula.

 

Kharif sowing gathered pace as monsoon activity picked up. Total kharif sowing area rose 1.6% year-on-year to 11.99 million hectares as of June 19. The area under rice, which accounts for about one-third of the kharif area, rose 52.8% to 1.24 million hectares. The area under pulses increased 12.8% to 0.72 million hectares, while the area under oilseeds fell 10.7% to 0.72 million hectares. Sugarcane sowing, which is nearing completion, increased 1.2% to 5.73 million hectares. Sowing in the country is still in its early stages, with only 11% of the normal kharif area of 110.45 million hectares covered so far.

 

 

Coming up

• June 29: Index of Industrial Production for May
• June 30: Government finances for April-May
• July 1:    GST collections for June
• July 1:    HSBC India Manufacturing PMI for June 

Tailpiece 
As of June 25, 71% of the country’s area fell under the ‘deficient’ or ‘large deficient’ rainfall categories. The India Meteorological Department classifies rainfall that is 20% to 59% below the long-period average as ‘deficient’ and rainfall that is 60% or more below the long-period average as ‘large deficient’.