Week in Numbers: Tracking India’s Economic Pulse

India’s manufacturing activity improved modestly in January after easing in Decembeṛ. The HSBC India Manufacturing PMI rose to 55.4 in January from a two-year low of 55.0 in December, supported by faster growth in new orders, output and employment.

While the January reading was below the flash estimate of 56.8, it remained above the long-run average of 54.2. Consumer goods emerged as the strongest-performing segment, while capital goods lagged. Domestic demand continued to drive sales, while export growth was among the weakest in 15 months.

Factory-gate price inflation softened to its lowest level in nearly two years even as input cost pressures intensified. Business confidence fell to a three-and-a-half-year low, with only 15% of firms expecting higher output over the next year.

Private-sector services activity strengthened in January, driven by gains in new business and output. The HSBC India Services PMI rose to 58.5 in January from an 11-month low of 58.0 in December. Finance and insurance recorded the largest increases in output and new orders. The India Composite PMI rose to 58.4 from 57.8. Both the services and composite PMIs, however, came in below their flash estimates.

Goods and services tax collections continued to rise, albeit at a modest pace. GST collections, including compensation cess, increased 2.0% year-on-year to ₹1.99 trillion in January, the highest level in eight months. Net of refunds, collections rose 2.8% to ₹1.76 trillion, while collections excluding cess increased 6.2% to ₹1.93 trillion.

The government has discontinued the compensation cess on most products, barring tobacco. The cess on tobacco products, retained as a transitory measure, has since been 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 for 2025-26 is projected at ₹10.46 trillion, ₹1.32 trillion below the original Budget estimate.

The Monetary Policy Committee of the Reserve Bank of India revised its growth and inflation assessments in the February policy review. The central bank raised its CPI inflation forecast for January-March to 3.2% from 2.9%. The RBI has also raised its projections for April-June to 4.0% from 3.9% earlier and for July-September to 4.2% from 4.0%, citing higher prices of precious metals. The RBI deferred releasing a full-year inflation forecast pending the launch of the new CPI series on February 12.

The central bank raised its GDP growth forecasts for April-June and July-September by 20 basis points each to 6.9% and 7.0%. A full-year growth forecast was not provided, pending the release of the new GDP series later this month.

Electricity generation from conventional sources rose 1.9% year-on-year to 128.59 billion kWh, led by a 6.1% increase in hydroelectric power output. Thermal power generation increased 1.6% to 115.73 billion kWh. Over recent years, output from conventional sources, particularly thermal plants, has declined as a share of total power generation. In April-January, electricity generation from conventional sources contracted 2.6% year-on-year to 1,282.51 billion kWh.

Freight traffic at major ports rose 8.2% year-on-year to 755.84 million tonnes in April-January, supported by strong growth in crude oil and petroleum products and container cargo. Crude and petroleum volumes rose 9.7%, while container traffic increased 10.2%.

Growth in e-way bill generation moderated in January but remained healthy at 15.8% year-on-year, with 136.84 million bills generated — the second-highest monthly tally after December. In April-January, e-way bills rose 20.4% to 1,286.42 million, pointing to sustained momentum in goods movement.

Domestic air passenger traffic fell 4.1% year-on-year to 14.31 million in December, marking the steepest contraction in nearly four years, amid operational disruptions at IndiGo. Passenger traffic at the airline, which accounts for about two-thirds of the domestic market, declined 11.4% to 8.52 million. For calendar year 2025, domestic airlines carried 166.95 million passengers, up 3.5% from the previous year. 

Capacity utilisation in the manufacturing sector edged up to 74.3% in July-September from 74.1% in the previous quarter. On a seasonally adjusted basis, utilisation fell by 100 basis points sequentially to 74.8%, though it remained 10 basis points higher than a year earlier and above the long-term average of 73.9%. Despite utilisation remaining above levels typically associated with a revival in private investment for several quarters, a broad-based pick-up in private capital expenditure has yet to materialise.

Urban consumer confidence softened in January, reflecting weaker expectations for economic conditions, income and prices. The Current Situation Index declined to 98.1 from 98.4 in November, while the Future Expectations Index fell to 123.4 from 125.6.

India’s foreign exchange reserves rose to a record $723.77 billion as of January 30, driven by higher gold prices. Reserves increased $14.36 billion during the week, the fastest rise in nearly a year. Foreign currency assets fell by $493 million and gold reserves rose by $14.60 billion. Overall, reserves have increased by $55.45 billion so far this fiscal year, driven primarily by gains in gold holdings.

Winter rainfall remained uneven. Cumulative rainfall during January 1-February 6 stood at 13.2 mm, 36% below the long-period average. Reservoir storage levels remained well above historical norms. As of February 5, water levels in 166 reservoirs stood at 122.31 billion cubic metres, or 67% of their total live capacity — 8% higher than a year earlier and 25% above the 10-year average. This supports irrigation demand late in the rabi season and limits downside risks to hydropower output.

With the rabi sowing season nearing completion, the total sown area reached 67.68 million hectares as of January 30, up 2.4% from a year earlier and above the normal acreage. Wheat, pulses and oilseeds all recorded higher sowing, pointing to a broadly favourable rabi outlook.

Coming up:

• Feb 12 – Consumer Price Index for January
• Feb 12 – Wholesale Price Index for January
• Feb 12 – Trade data for January 

Tailpiece
The RBI attributed its upward revision to the January-March inflation forecast to unfavourable base effects following a sharp price decline last year. The explanation sits uneasily with the fact that base effect are known in advance and are typically incorporated into projections.