Week in Numbers: Tracking India’s Economic Pulse

India’s annual inflation rate, based on the Wholesale Price Index, rose to 9.68% in May, the highest level in the 26 months for which data are available, from 8.26% a month earlier. The Department of Promotion of Industry and Internal Trade, which compiles WPI, has introduced a new series with 2022-23 as the base year. The inflation rate in the new series, which has a larger number of items, is marginally lower than that in the old series. Over the last 25 months, the inflation rate in the new series was, on average, 0.41 percentage points lower than that in the old series.

 

The increase in inflation in May was primarily due to higher prices of liquefied petroleum gas and tomatoes, which rose 49.6% and 48.2% month-on-month, respectively.

Among the three broad groups, the annual inflation rate was 4.99% in primary articles, 30.33% in fuel and power and 7.48% in manufactured products in May.

WPI inflation had jumped in April primarily on account of a sharp increase in prices of crude petroleum and products. However, this increase has not yet been fully reflected in the more widely tracked Consumer Price Index, as state-owned oil marketing companies have only partially increased the prices of auto fuels and cooking gas. Inflation, as measured by the CPI, increased to 3.93% in May from 3.40% in April. Also, unlike CPI, the impact of crude and petroleum products gets counted twice in WPI as crude and then as products. Petroleum product prices are likely to moderate in the coming months following the ceasefire agreement between the US and Iran, reducing pressure on overall inflation.

 

India’s annual inflation rate, based on the newly introduced Output Producer Price Index, rose to a 26-month high of 9.38% in May from 8.06% a month earlier. Inflation based on the new Output PPI closely tracked that WPI inflation in recent months. In the last 14 months, the average difference between the two inflation measures has been just 0.18 percentage points.

Output PPI measures the average change in prices received by producers for their output. This measure excludes taxes, trade margins and transport margins but includes subsidies.

WPI measures the price of bulk goods in the wholesale market, while PPI measures prices of goods and services as they leave the factory gate. Most advanced economies, including the US and the UK, have shifted from WPI to PPI. The government aims to replace WPI with the Output PPI over a period of five years. In addition to the Output PPI, the Department of Promotion of Industry and Internal Trade has brought out a monthly input PPI and seven quarterly service PPIs.

India’s merchandise trade deficit remained elevated at $28.21 billion in May as imports grew faster than exports during the month. The trade deficit in May was marginally higher than $28.20 billion in April but sharply above $22.55 billion a year ago.

Merchandise exports rose 18.0% year-on-year to $45.20 billion in May, the fastest pace in six months. Imports rose 20.6% to $73.41 billion. In absolute terms, exports were the highest on record for any month, and imports were the second-highest since October.

Growth in imports was driven by a sharp rise in shipments of crude and petroleum products, electronic goods and gold. Imports of crude and petroleum products increased 53.8% to $22.68 billion, while electronic goods rose 35.5% to $12.32 billion, and gold increased 34.0% to $3.42 billion.

The rise in imports of crude and petroleum products and gold mainly reflects higher international prices. The sharp rise in gold imports is despite the government’s increase in the import duty on the precious metal to 15% from 6% during the month.

Exports in May rose primarily due to a sharp increase in shipments of petroleum products and engineering goods. Exports of petroleum products increased 54.9% to $8.42 billion, while those of engineering goods rose 24.5% to $12.31 billion.

The ceasefire agreement between the US and Iran, along with the opening of the Strait of Hormuz to shipping, is likely to support international trade.

India’s unemployment rate rose to an 11-month high of 5.5% in May from 5.2% in April, driven primarily by a sharp increase in rural unemployment. The rural unemployment rate rose to 5.1% from 4.6%, while the urban rate fell to 6.4% from 6.6%. Unemployment among rural males rose to 5.2% from 4.7%, while unemployment among females increased to 4.7% from 4.4%.

Unemployment among youth remained elevated, especially in urban areas. Unemployment among youth increased to 15.9% from 15.3% a month earlier, primarily due to a sharp rise in rural youth unemployment. This is the highest youth unemployment rate since the National Statistics Office began conducting the survey in January 2025. However, urban youth unemployment fell to 17.5% in May from 18.0% a month earlier, while rural youth unemployment rose to 15.1% from 14.1%. Meanwhile, the overall labour force participation rate — the percentage of the population working or available for work — fell to an 11-month low of 54.4% in May from 55.0% in April.

The financial performance of private companies continued to improve in the January-March quarter, with sales rising in double digits for the second consecutive quarter, following single-digit growth over the previous eleven quarters, according to a Reserve Bank of India study. Overall sales of 3,266 listed private non-financial companies increased 13.9% year-on-year in January-March, up from 10.1% in October-December and 7.1% a year ago, led by growth in sales of non-IT services and the manufacturing sector.

Sales of manufacturing companies expanded 14.5% in January-March, up from 11.4% in the previous quarter and 6.6% a year earlier, driven by higher sales growth in automobiles, electrical machinery and non-ferrous metals industries. Sales growth of information technology companies improved to 9.9% from 8.8% in October-December and 8.6% a year earlier, while that of non-IT services companies jumped to 20.3% from 10.6% a quarter ago and 10.9% a year earlier.

Growth in operating profit of listed private non-financial companies improved to 9.8% in January-March, up from 8.9% both a quarter ago and a year earlier. Manufacturing companies posted operating profit growth of 9.4%, down from 11.8% a quarter ago but up from 8.1% a year earlier. Operating profit growth of IT companies rose to 14.1% from 11.1% in the previous quarter and 2.4% a year earlier, while that of non-IT services companies improved to 6.5% from 4.0% a quarter ago but was sharply lower from 18.4% a year ago.

India recorded a current account surplus of $4.7 billion in April, compared with a deficit of $4.8 billion a year ago, mainly due to a sharp increase in net transfers and services exports. Net transfers increased 70.2% year-on-year to $16.0 billion, while service exports increased 12.8% to $37.0 billion.

The capital account recorded a deficit of $11.3 billion in April, compared with a surplus of $5.3 billion a year ago. Within the capital account, foreign portfolio investment outflows widened to $8.7 billion from $2.1 billion a year earlier. Net foreign direct investment inflow increased to $7.4 billion from $1.6 billion a year earlier. Overall, the balance of payments showed a deficit of $6.6 billion compared with a surplus of $0.5 billion a year earlier.

This is the first time the Reserve Bank of India has released monthly balance of payments data. The RBI said it will release the data on the 15th of every month.

Growth in automobile dispatches remained robust, even as it slowed compared with previous months. Total automobile dispatches slowed to 17.3% year-on-year in May from 27.9% a month earlier. However, dispatches increased sequentially by 1.5% to 2.41 million units. The slowdown was primarily due to a sharp decline in motorcycle sales growth, from 30.6% a month earlier to 7.2%. As a result, two-wheeler dispatches slowed to 14.8% from 28.4% a month earlier.

Passenger vehicle dispatches remained buoyant despite increases in petrol and diesel prices. Passenger vehicle dispatches grew 27.3% to 438,854 units in May. This was the fastest growth in more than three years. The government had increased retail prices of petrol and diesel by 7.4% and 8.4%, respectively, in May.

Despite the overall slowdown, automobile dispatches have remained buoyant, with double-digit growth over the last seven months. Growth in automobile production slowed to 13.3% from 26.0% a month earlier, suggesting that manufacturers expect demand to moderate in the months ahead.

Consumption of petroleum products declined at the fastest pace in 55 months in May, as the conflict in West Asia continued to disrupt supplies. Petroleum product consumption declined 6.5% year-on-year to 19.93 million tonnes in May, dragged down by a sharp decline in liquefied petroleum gas, which contracted 20.5% to 2.13 million tonnes. Petrol and diesel consumption rose even as retail prices increased. Consumption of petrol climbed 3.4% to 3.91 million tonnes, while diesel increased 1.6% to 8.73 million tonnes.

India’s foreign exchange reserves fell to the lowest level in more than a year as prices of gold declined sharply. The reserves fell by $9.99 billion to $671.63 billion for the week ended June 12. Gold reserves declined by $10.75 billion to $103.82 billion, while foreign currency assets increased by $846 million to $544.29 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 a slew of measures to attract foreign flows, including a concessional forex swap for external commercial borrowings raised by public sector units and hedging cost for banks offering foreign currency non-resident accounts.

Reservoir storage levels continued to fall for the 11th consecutive week as the onset of the southwest monsoon was delayed in many parts of the country. As of June 18, live storage in reservoirs was at 50.46 billion cubic metres, equivalent to 27% of total capacity and 13% lower than a year ago. However, live storage was 13% higher than the 10-year average. The onset of the southwest monsoon has been delayed in the western and central parts of India. The reservoirs are typically recharged during the monsoon season.

Southwest monsoon rainfall across the country has been underwhelming so far. As of June 19, cumulative rainfall over the country was 41% below normal at 51.5 millimetres. Of the country’s four regions, rainfall was 4% below normal over northwest India, 45% below normal over east and northeast India, 64% below normal over central India and 22% below normal over the south peninsula.

Kharif sowing was slow as the monsoon remained patchy across the country. The total kharif sowing area declined 3.9% year-on-year at 8.46 million hectares as of June 12. The area under rice, which accounts for about one-third of the kharif area, rose 28.4% to 0.50 million hectares. Area under pulses declined 43.2% to 0.16 million hectares, while area under oilseeds fell 0.8% to 0.35 million hectares. Sugarcane sowing, which is mostly over, was 0.4% lower at 5.41 million hectares. However, sowing is still in its early stages, with only 8% of the normal kharif area of 110.45 million hectares covered so far.

 

Coming up:

• June 22: Index of Eight Core Industries for May
• June 23: HSBC India Flash PMI for June
• June 29: Index of Industrial Production for May

Tailpiece
The southwest monsoon has been so weak that rainfall has been below normal on all but one of the first 19 days of the season. So far this season, rainfall was above normal only on June 5.