Week in Numbers: Tracking India’s Economic Pulse

India’s private-sector activity moderated marginally in May, weighed down by the war in West Asia and the sharp rise in crude oil prices. The HSBC Flash India Composite PMI eased to 58.1 from 58.2 in April, dragged lower by weaker manufacturing activity.

The HSBC Flash India Manufacturing PMI fell to 54.3 from 54.7 a month earlier due to softer growth in new orders, international sales, employment and business activity. The manufacturing PMI reading for May was the second-weakest in nearly four years. Even after the slowdown, the manufacturing PMI remained broadly in line with its long-run average.

The HSBC Flash India Services PMI edged up to 58.9 from 58.8 in April. The pick-up in services activity was offset by slower growth in factory output. The survey showed manufacturers continued to stockpile inputs in May, with purchasing activity rising at the fastest pace in three months and inventories of raw materials increasing. Inventories of finished goods also rose for the second consecutive month in May. 

New business received by manufacturing and services firms grew more slowly in May, weighing on the composite reading. According to the survey, sales during the month were affected by competitive pressures, weak demand, travel disruptions, and the war in West Asia.

Input cost inflation accelerated in May, although firms limited the pass-through of higher costs to customers by raising output prices at a slower pace.

Flash PMI readings have generally overshot final estimates in recent months, with the composite index averaging 0.5 points higher than the final reading over the past year.

Growth in India’s key core industries remained tepid in April, though it improved marginally from March. Output across eight core industries – coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity – grew 1.7% year-on-year in April, up from a revised 1.2% in March.

Output in five of the eight sectors contracted year-on-year in April, reflecting the disruptions faced by India’s core industries due to war in West Asia.

Output of cement and steel was robust in April, growing at 9.4% and 6.2%, respectively. Cement and steel production has supported overall momentum in the core sector in recent months. In 2025-26, cement and steel output grew 8.7% and 9.5%, respectively, compared with overall core sector growth of 2.7%.

Net foreign direct investment in India remained positive for the second consecutive month in March. The positive net FDI, despite a deceleration in gross FDI, was due to relatively lower repatriation and outward FDI in March. Net FDI was at $1.57 billion in March, down from $4.45 billion in February.

Gross FDI inflows slowed to $6.23 billion from $8.99 billion in February. Repatriation increased marginally to $2.32 billion in March from $1.74 billion a month earlier, while overseas investments by Indian firms fell to $2.33 billion from $2.81 billion.

In 2025-26, net FDI rose to $7.65 billion from $959 million a year ago, due to a sharp increase in gross FDI inflows, which rose to $94.53 billion from $80.62 billion.

The Indian rupee weakened in real effective terms in April, driven by nominal depreciation and lower inflation relative to trading partners. The 40-currency trade-weighted real effective exchange rate index fell to a near 13-year low of 90.96 from 92.57 in March. The Indian rupee depreciated 0.1% in April, though the decline was limited by the ceasefire between the US and Iran and measures announced by the Reserve Bank of India.

India’s foreign exchange reserves fell to a seven-week low as the Reserve Bank of India sold dollars aggressively in the foreign exchange market to shield the rupee from a sharp depreciation. The reserves declined by $8.09 billion to $688.89 billion as of May 15. Foreign currency assets fell by $6.48 billion to $545.90 billion, while gold reserves declined by $1.54 billion to $119.32 billion. The rupee weakened 1.5% against the dollar during the week as hopes of a ceasefire agreement between the US and Iran faded.

The estimated number of unincorporated establishments increased to 91.6 million in January–March, up 16.7% from 78.5 million a year ago, according to the Annual Survey of Unincorporated Sector Enterprises. The sector employed about 151.71 million workers in January-March, up 15.5% year-on-year. This is the first time employment in the informal sector has crossed 150 million. Unincorporated non-agricultural establishments refer to entities not registered under the Companies Act.

The pre-monsoon season has been normal so far, with cumulative rainfall from March 1 to May 22 at 110.1 mm, marginally above the long-period average of 110.0 mm.

Reservoir storage levels, though declining, remained well above historical norms. As of May 21, storage was at 60.83 billion cubic metres, or 33% of total capacity — 12% higher than a year earlier and 24% above the 10-year average.

Coming up

• May 29: Government finances data for 2025-26
• June 1: Index of Industrial Production for April
• June 5: Quarterly Estimates of GDP for January-March 

Tailpiece
The Office of the Economic Adviser, which compiles data on the eight core industries, revised March core sector growth sharply upward to 1.2% from (-)0.4% reported earlier. The revision was driven largely by a steep upward revision in March steel output growth to 7.7% from 2.2% earlier. Such massive revisions raise concerns over the reliability and credibility of the data released by government departments.