Week in Numbers: Tracking India’s Economic Pulse

India’s annual inflation rate, based on the Consumer Price Index (Combined), rose less than expected in May, as the recent increase in petrol and diesel prices was not fully captured in the latest data. CPI inflation rose to a 16-month high of 3.93% in May from 3.48% a month earlier. Most analysts had expected headline inflation to reach the Reserve Bank of India’s medium-term target of 4.0% in May due to the increases in petrol and diesel prices.

 

The rise was primarily due to higher prices of petrol, diesel, snacks and meals following an increase in commercial cooking gas prices. Petrol and diesel prices in the CPI rose by 3.1% and 3.3% month on month, respectively, in May, although oil marketing companies increased prices by 7.8% and 8.6%, respectively. This is because the CPI uses the 15th of the month as the reference date for recording petrol and diesel prices. Oil marketing companies increased petrol and diesel prices in four tranches, beginning on May 15. As a result, the CPI data captured only the first increase in petrol and diesel prices.

According to the Reserve Bank of India, the cumulative increase in petrol and diesel prices will contribute about 36 basis points to headline CPI inflation. The prospect of an imminent ceasefire between the US and Iran has somewhat improved the inflation outlook, as crude oil prices are expected to fall if the war ends. This may, in turn, reduce pressure on the RBI’s Monetary Policy Committee to raise interest rates.

India recorded a balance-of-payments surplus of $7.22 billion in January-March, compared with a deficit of $24.41 billion a quarter earlier, despite the sharp rise in crude oil prices due to the war in West Asia. The improvement was mainly due to a current account surplus in January-March. India registered a current account surplus of $7.05 billion in the March quarter compared with a deficit of $15.52 billion a quarter ago. India had a current account surplus of $13.63 billion a year earlier. As a percentage of GDP, the current account balance was 0.7% of GDP compared with 1.5% a quarter ago and 1.4% a year ago.

 

The current account improved in January-March, primarily due to a lower merchandise trade deficit and sharply higher invisibles. Merchandise trade deficit narrowed to $83.43 billion from $95.87 billion a quarter ago, while invisibles increased to $90.48 billion from $80.35 billion. Within invisibles, net services receipts increased to $60.36 billion from $57.49 billion a quarter ago.

On the capital account, foreign direct investment recorded a net inflow of $4.21 billion in January-March, compared with an outflow of $3.66 billion in the previous quarter. Foreign portfolio investment saw a net outflow of $12.05 billion during the quarter, sharply up from $177 million in October-December.

For the full year, India had a balance-of-payments deficit of $23.60 billion, sharply up from $5.03 billion the year before. The current account deficit increased to $25.37 billion from $23.06 billion. The current account deficit accounted for 0.6% of GDP in 2025-26, unchanged from the previous year.

 

In 2026-27, the current account deficit is expected to widen to 1.5-1.8% of GDP, given the rise in crude oil prices. However, the recent measures announced by the RBI to attract foreign capital inflows are likely to ensure a balance-of-payments surplus.

Growth in India’s retail automobile sales moderated to single digits for the first time in six months in May as the fuel price increase ate into demand. Total sales growth slowed to 9.5% year-on-year from 17.4% in April, with sales reaching 2.53 million units. The slowdown was driven primarily by weaker growth in two-wheelers, commercial vehicles and three-wheelers. Automobile sales have largely remained buoyant since the government cut goods and services tax rates in September 2025.

 

Two-wheeler sales rose 7.5% to 1.84 million units, down from 17.2% a month earlier. Commercial vehicle sales growth slowed to 5.3% from 18.8%, with sales reaching 83,823 units in May, while three-wheeler sales growth eased to 3.6% from 10.4%.

Passenger vehicle sales growth, however, accelerated sharply in May. Sales increased 23.2% to 402,591 units, up from 18.1% in April. Electric vehicle penetration continued to rise, though it remained modest at 9.3% in two-wheelers, 6.6% in passenger vehicles, and 2.3% in commercial vehicles.

India’s mutual fund industry witnessed outflows in May, a month after posting record inflows. Open-ended mutual fund schemes saw outflows of ₹628 billion in May, driven by outflows of ₹969 billion from debt schemes. The mutual fund industry had witnessed record inflows of ₹3.27 trillion in April.

 

Inflows into equity schemes moderated to a one-year low of ₹229 billion in May, compared with ₹384 billion in April. Inflows into equity mutual funds have remained positive for more than five years.

 

Systematic investment plan inflows remained robust despite volatility in stock markets. SIP inflows were ₹310 billion in May, almost unchanged from ₹311 billion a month earlier, while the number of contributing SIP accounts stood at 96.4 million. Gold ETFs saw outflows of ₹7 billion compared with inflows of ₹30 billion in April. The mutual fund industry’s net assets under management stood at ₹81.58 trillion at the end of May.

 

Growth in e-way bill generation moderated to a seven-month low of 10.9% year-on-year in May. Growth in e-way bill generation has been moderating after touching a two-year high of 27.6% in November. The total number of bills generated was 136.08 million, up from 133.37 million in April. Despite the slowdown, e-way bill generation in May was the third-highest ever recorded.

 

India’s coal production contracted at the fastest pace in 10 months in May despite a pickup in overall despatches. Production declined 9.5% year-on-year to 78.13 million tonnes in May, marking the third consecutive month of contraction. Overall coal despatches, however, rose 3.3% to 92.02 million tonnes. Coal demand in recent months has been dampened by lower thermal power generation and higher renewable output. The power sector accounts for about 80% of coal despatches. Coal despatches to power plants in April-May declined 1.1% to 142.10 million tonnes.

 

Growth in tractor sales moderated but remained elevated. Domestic sales rose 19.6% year-on-year to 108,229 units in May. This was the tenth consecutive month of double-digit growth in tractor sales. The tractor industry has been one of the biggest beneficiaries of the GST rate cuts implemented in September 2025. Total sales, including exports, rose 19.1% to 118,394 units, while production increased 15.5% to 112,317 units in May. In absolute terms, total production in May was the second-highest ever, suggesting that manufacturers expect sales to remain robust.

 

External commercial borrowings by Indian companies fell to $3.77 billion in April from $5.43 billion in March. The borrowings in April, however, were higher than $2.92 billion in April last year. ReNew Surya Roshni was the largest borrower at $500 million, followed by Reliance Industries at $480 million and Serentica Renewables India 14 at $397 million. External commercial borrowings are likely to increase substantially following the Reserve Bank of India’s decision to provide a concessional forex swap facility until September 30 to incentivise external commercial borrowings by public sector units.

 

India’s foreign exchange reserves eased marginally in the week ended June 5. The reserves fell by $711 million to $681.61 billion, with foreign currency assets declining by $2.70 billion to $543.44 billion and gold reserves rising by $1.98 billion to $114.58 billion. India’s foreign exchange reserves are likely to rise significantly after the Reserve Bank of India and the government announced a slew of measures to attract foreign flows, including a concessional forex swap for external commercial borrowings raised by public sector units and full hedging-cost support for banks offering foreign currency non-resident accounts.

 

Food grain stocks with the government were at a record high as of June 1. Total grain stocks, including unmilled paddy, stood at 121.75 million tonnes — the highest ever for June 1. Rice stocks were at 39.63 million tonnes, the highest on record, while wheat stocks were at 53.41 million tonnes, the highest in nearly five years. The government held 42.84 million tonnes of unmilled paddy, equivalent to about 28.70 million tonnes of rice. High stock levels have prompted the government to allow wheat exports for the first time in nearly four years.

 

Reservoir storage levels continued to fall as the onset of the southwest monsoon was delayed in many parts of the country. As of June 11, live storage in reservoirs stood at 51.92 billion cubic metres, accounting for 28% of total capacity and down 8% from a year ago. However, live storage remained 18% above the 10-year average. The southwest monsoon set in over Kerala on June 4, three days later than its normal onset date of June 1. Last year, the monsoon set in over Kerala on May 24.

 

Southwest monsoon rainfall across the country remained weak. As of June 12, cumulative rainfall was 26% below normal at 33.4 millimetres. So far this season, rainfall has been below normal on all but one day. Of the country’s four regions, rainfall was 9% above normal over northwest India, 37% below normal over east and northeast India, 50% below normal over central India and 2% below normal over the south peninsula.

Coming up

• June 15: Automobile sales in May
  
• June 15: Periodic Labour Force Survey for May
  
• June 15: Trade data for May

Tailpiece
Mizoram’s retail inflation of 1.0% in May was roughly a fourth of India’s overall inflation rate of 3.9%.