Week in Numbers: Tracking India’s Economic Pulse

India’s current account deficit narrowed to $13.20 billion in October-December from $14.13 billion a quarter ago, but remained higher than $11.34 billion a year ago. As a percentage of GDP, the current account deficit fell to 1.3% of GDP from 1.5% a quarter ago, but remained above 1.1% of GDP a year ago. The sequential decline in the current account deficit was driven by higher net services receipts.

Merchandise trade deficit widened to $93.63 billion in October-December from $89.19 billion a quarter ago, partly reflecting weaker exports amid higher US tariffs. However, a rise in invisibles to $80.43 billion from $74.96 billion a quarter ago helped narrow the current account deficit.

On the capital account, foreign direct investment recorded a net outflow of $3.66 billion in October-December, compared with an inflow of $1.88 billion in the previous quarter. Foreign portfolio investment saw a net outflow of $177 million during the quarter, much smaller than the $5.75 billion net outflow in July-September.

On a balance of payments basis, foreign exchange reserves depleted by $24.41 billion in October-December, compared with a decrease of $10.92 billion a quarter ago. With the war in Iran threatening global supply chains and affecting crude oil prices, the current account deficit is likely to rise sharply in the January-March quarter. 

Industrial growth slowed to a three-month low of 4.8% in January from 8.0%, mainly on account of a sharp moderation in consumer goods output. Growth in manufacturing, which accounts for more than three-fourths of the industrial production index, declined to 4.8% from 8.4% a month earlier. Within manufacturing, growth was uneven. Output of nine of the 24 industry groups contracted year-on-year during the month.

 
Among use-based industries, growth in consumer durable goods moderated to 6.3% from 12.4% a month earlier, while output of consumer non-durable goods declined 2.7% compared with 8.5% growth in the preceding month.

 

India’s private sector manufacturing activity strengthened in February, led by an improvement in new orders and a rise in production volumes. HSBC Manufacturing PMI rose to a four-month high of 56.9 in February from 55.4 in January. The reading was lower than the flash estimate of 57.5 but remained comfortably above the long-run average of 54.2. Exports grew at their slowest rate in 17 months. The war in West Asia and the resultant supply chain disruptions are likely to dampen activity in the coming months.

 

Service activity remained strong during the month. India Services PMI remained unchanged at 58.5. Services exports gained momentum, even as new orders rose at the slowest pace in 13 months. India’s Composite PMI rose to a three-month high of 58.9 in February from 58.4 a month earlier. 

Retail automobile sales picked up pace in February, marking an across-the-board improvement. Total retail sales rose 25.6% year-on-year to 2.41 million units, the second-highest monthly growth rate in the last 16 months after October’s GST-led surge. The data suggest that demand has held up beyond the immediate policy impulse.

 

Growth was led by two-wheelers, passenger vehicles, commercial vehicles, tractors, and three-wheelers. Two-wheeler sales rose 25.0% to 1.70 million units, while passenger vehicle sales increased 26.1% to 394,768 units.

Commercial vehicle sales grew 28.9% year-on-year, with volumes at 100,820. Tractor sales increased 36.4% to 89,418 units, while three-wheelers rose 24.4% to 117,130 vehicles.

The overall growth was evenly balanced across rural and urban sectors, with sales rising 25.2% and 26.1%, respectively.

Inventory levels continued to normalise, with passenger vehicle stocks declining to 27-29 days from 53-55 days in October. Lower inventories indicate improved supply discipline and stronger alignment between wholesale dispatches and retail demand.

Despite the reduction in goods and services tax rates, goods and services tax collections continued to rise. Overall GST collections, including the compensation cess, increased 2.8% year-on-year to ₹1.89 trillion in February. Collections, net of refunds, rose 2.0% to ₹1.66 trillion, while collections excluding cess increased 8.1% to ₹1.84 trillion.

 

The government has discontinued the compensation cess on most products, except for tobacco products. The cess on tobacco products, retained as a transitory measure, has since been partly subsumed into excise duty with effect from February 1.

The Budget has projected the Centre’s share in GST collections for 2026-27 at ₹10.19 trillion, 2.6% lower than the revised estimate for the current year, largely reflecting the discontinuation of the compensation cess. The Centre’s share in GST collection in 2025-26 is projected at ₹10.46 trillion, ₹1.32 trillion below the original Budget estimate.

Electricity generation from conventional sources declined 1.6% year-on-year to 119.56 billion kWh, led by a 3.0% decline in thermal power generation. Over recent years, output from conventional sources, particularly thermal plants, has declined as a share of total power generation. In April-February, cumulative electricity generation from conventional sources fell 2.4% year-on-year to 1,402.47 billion kWh.

   

India’s foreign exchange reserves rose to a record $728.49 billion as of February 27, primarily on account of a rise in gold prices. The reserves rose by $4.89 billion during the week, with gold reserves increasing by $4.14 billion to $131.63 billion. Foreign currency assets increased $561 million to $573.13 billion. Gold reserves have increased by $53.45 billion in the current financial year, even though physical bullion reserves remain unchanged at 880 tonnes.

 

Winter rainfall was well below normal. Cumulative rainfall during January-February was 16.0 mm, 60% below the long-period average of 39.8 mm. Reservoir storage levels continued to fall but remained well above historical norms. As of March 5, water levels in 166 reservoirs stood at 104.13 billion cubic metres, or 57% of their total live capacity — 13% higher than a year earlier and 27% above the 10-year average.

 

Coming up:

• Mar 12: CPI inflation for February
• Mar 16: WPI inflation for February
• Mar 16: Trade data for February 

Tailpiece:
New foreign direct investment in India recorded a net outflow of $3.7 billion in October-December, higher than $2.8 billion in a year ago. However, for April-December, the number remains better at $3.04 billion inflows as against $593 million inflows in the corresponding period.