Week in Numbers: Tracking India’s Economic Pulse

Growth in India's private sector continued to accelerate in the new year. HSBC flash PMI data showed faster growth in February, particularly in manufacturing, driven by robust output and new domestic orders.

The flash Manufacturing PMI rose to a four-month high of 57.5 in February from 55.4 in January. The reading was comfortably above the long-run average of 54.2. The flash Composite PMI rose to a three-month high of 59.3 in February from 58.4 in January. The acceleration was driven by a quicker upturn in factory production, while growth in services activity was broadly similar to January’s pace. The Services PMI eased marginally to 58.4 from 58.5. Flash PMI readings have tended to overestimate final readings in recent months. On average, the flash Composite PMI over the past 10 months has been 0.7 points higher than the final reading. 

India’s merchandise trade deficit widened sharply in January, driven primarily by a surge in precious metals imports and largely flat export growth. The deficit rose to $34.68 billion, up 38.5% month-on-month and 48.0% year-on-year, marking the third-highest monthly trade gap on record.

The widening was driven by a 19.2% year-on-year increase in total imports to $71.24 billion. Gold imports surged 349.2% to $12.07 billion, while silver imports more than doubled to $2.00 billion, up 127.0%.

Merchandise exports were broadly flat at $36.56 billion in January, compared with $36.34 billion a year earlier. Within exports, most labour-intensive sectors, including gems and jewellery, leather and leather products, and textiles, contracted year-on-year.

Exports to the US declined 21.8% year-on-year to $6.60 billion. In contrast, combined shipments to the next three largest destinations – the United Arab Emirates, China, and the Netherlands – rose 32.9% to $6.83 billion. However, cumulative exports to the US rose 5.9% to $72.46 billion during April-January. India’s exports to the US were hit after Washington imposed 50% tariffs on most Indian goods, including a 25% punitive levy, citing India’s strategic ties with Russia. Indian exports to the US are expected to pick up after the US reduced tariffs on Indian goods to 18% last month.

Performance of infrastructure industries moderated in January due to board-based weakness. Growth in infrastructure industries slowed to 4.0% in January from a revised 4.7%, as output growth in seven of the eight core sectors moderated.

The eight core industries – coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity – together account for 40.3% of the Index of Industrial Production.

Output of crude oil contracted year-on-year for the fifth straight month, while natural gas output declined for the 22nd consecutive month.

Construction-related sectors, such as cement and steel, have been supporting overall core sector growth in recent months. Steel and cement output grew 9.8% and 9.1%, respectively, during April–January, compared with overall core sector growth of 2.8% in the period.

India’s annual wholesale price inflation rose to a 10-month high of 1.81% in January from 0.83% in December, driven largely by a low base effect and higher base metal prices.

On a month-on-month basis, the Wholesale Price Index increased 0.51% in January, unchanged from the previous month.

Among the major components, annual inflation in manufactured products climbed to a 10-month high of 2.86% in January, up from 1.82% in December, led by higher base metal prices. Food inflation also accelerated, rising to an eight-month high of 1.41% from 0.00% in December.

Annual core WPI inflation rose to its highest level in over three years at 3.2% in January, up from 2.0% in December. This reading is broadly in line with core inflation under the new Consumer Price Index series, which has 2024 as the base year. Core inflation under the new series was estimated at 3.4%, compared with 4.6% in December under the old base year.

WPI inflation is likely to remain firm in the near term, driven by the continued low base effect and rising base metal prices.

The Office of the Economic Adviser, which compiles the WPI series, set up a working group in December to revise the base year to 2022-23 from the current 2011-12.

India’s unemployment rate rose to a three-month high of 5.0% in January from 4.8% a month earlier, led by a sharp rise in joblessness among women. The female unemployment rate rose to an eight-month high of 5.6% in January from 4.9% a month earlier, while the male unemployment rate rose to 4.8% from 4.7%. The rural unemployment rate rose to 4.2% from 3.9%, while the urban rate increased to 7.0% from 6.7%.

Unemployment among youth (ages 15-29) increased to 14.7%, while urban youth unemployment rose to 18.6%.

The labour force participation rate for those aged 15 and above eased to 55.9% in January from an eight-month high of 56.1% in December.

Net foreign direct investment into India remained negative for the fourth consecutive month in December, due to a rise in repatriation by foreign investors and outward FDI. Net FDI outflow was $1.61 billion in December, compared with $475 million in November, as repatriation rose to $7.45 billion from $5.34 billion. Outward FDI also rose to $2.75 billion in December from $1.54 billion in November. Gross FDI inflows, however, rose to $8.58 billion in December from $6.41 billion in November.

Net FDI during April–December, however, remained positive at $3.99 billion, compared with $593 million in the same period of last year. Gross FDI inflows during the first nine months of the fiscal year rose to $73.31 billion from $63.09 billion a year earlier.

The Indian rupee depreciated in real effective terms in January, as nominal depreciation more than offset higher prices in India relative to major trading partners. The 40-currency trade-weighted real effective exchange rate index fell to 94.76 in January from 95.14 in December. The rupee depreciated against the US dollar during the month, pressured by foreign portfolio outflows and uncertainty surrounding the India-US trade deal.

India’s foreign exchange reserves rose to a record $725.73 billion as of February 13, up $8.66 billion from a week ago. Foreign currency assets rose $3.55 billion to $573.60 billion, and gold reserves increased by $4.99 billion to $128.47 billion. The reserves have increased by $57.40 billion so far this fiscal year, driven primarily by gold price appreciation.

Winter rainfall remained patchy. Cumulative rainfall during January 1-February 20 stood at 14.0 mm, 58% below the long-period average. Reservoir storage levels continued to fall but remained well above historical norms. As of February 19, water levels in 166 reservoirs stood at 113.16 billion cubic metres, or 62% of their total live capacity — 12% higher than a year earlier and 25% above the 10-year average.

Coming up

• Feb 27: Second advance estimate of GDP for FY25
• Feb 27: Quarterly estimates of GDP for October-December
• Feb 27: Revised estimates of GDP for FY24
• Feb 27: Government finances for April-January 

Tailpiece
Crude oil and natural gas production in January were 26.9% and 28.7%, respectively, below their April 2011 levels, according to core industries data.