Week in Numbers: Tracking India’s Economic Pulse

Industrial growth rose to a 26-month high of 7.8% in December from a revised 7.2% in November, driven by a robust increase in motor vehicles and base metals. Growth was supported by broad-based improvement across all three broad sectors and was sharply higher than consensus estimates of around 5%.

The manufacturing sector, which accounts for over three-fourths of the weight of the Index of Industrial Production, grew 8.1% in December, while mining and electricity output rose 6.8% and 6.3%, respectively. Manufacturing growth was led by motor vehicles and base metals, which expanded 33.5% and 12.7%, respectively.

The sharper growth in November and December was driven by stronger consumption demand, reflecting the impact goods and services tax rate cuts and festive-season spending. Output of consumer durables and consumer non-durables rose by an average 11.7% and 8.2%, respectively, over the two months.

 

The central government’s fiscal position improved sharply in December on a surge in tax collections. The fiscal deficit for April-December contracted 6.4% year-on-year to ₹8.56 trillion, aided by a fiscal surplus of ₹1.21 trillion in December. The fiscal deficit in April-December accounted for 54.5% of the Budget target of ₹15.69 trillion for the full year.

The improvement in December was primarily driven by a sharp increase in net tax revenues, which rose 36.5% year-on-year to ₹5.45 trillion. The government’s total receipts in April-December increased 8.9% year-on-year to ₹25.25 trillion, as net tax revenue rose 5.2% to ₹19.39 trillion. Total expenditure during the period grew 4.6% year-on-year to ₹33.81 trillion, well below the 8.8% growth projected in the Budget for the full year. Expenditure growth was primarily driven by a 15.0% year-on-year increase in capital expenditure to ₹7.88 trillion.

The government appears to be on course to meet the fiscal deficit target of 4.4% of GDP for the year.

 

Tax collections improved markedly in December, aided by higher corporate tax and customs duty collections and a surge in integrated goods and services tax. Total tax collections at the end of December rose to ₹29.84 trillion, up 8.5% year-on-year — slightly below the 12.5% growth assumed in the Budget. Tax collections in December jumped 32.4% year-on-year to ₹6.48 trillion.

Corporate tax collections rose 22.7% year-on-year to ₹2.81 trillion in December, while customs duty collections more than tripled to ₹529 billion. Although IGST surged to ₹741 billion in December, these collections will be adjusted against central GST and state GST in subsequent months, in line with settlement procedures.

To meet the full-year target of ₹42.70 trillion, tax collections would need to grow 23.1% in the remaining three months of the fiscal year. If collections grow at the current 8.5% pace over this period, the shortfall in 2025-26 would be around ₹1.5 trillion.

 

The Finance Ministry’s Economic Survey for 2025-26 projected that the Indian economy is likely to grow 6.8-7.2% in 2026-27, down from an estimated 7.4% in the current financial year. It said the growth outlook remains steady despite heightened global uncertainty, warranting caution but not pessimism.

The survey said the economy is on a stable footing, with medium-term growth potential rising to nearly 7% from about 6.5% three years ago. The coming year is expected to involve adjustment as firms and households adapt to reforms such as GST rationalisation, faster deregulation and simplified compliance requirements across sectors. Domestic demand and investment are expected to strengthen, supporting growth momentum, although the external environment remains challenging, with downside risks dominating the medium-term outlook.

India’s foreign exchange reserves touched a record $709.41 billion as of January 23, primarily reflecting a rise in gold prices. Reserves rose $8.05 billion week-on-week. Foreign currency assets increased $2.37 billion to $562.89 billion, while gold reserves rose $5.63 billion to $123.09 billion. Overall, reserves have increased by $41.09 billion so far this fiscal year, driven by higher gold prices.

Bank lending rates fell sharply in December, following the Reserve Bank of India’s 25-basis-point rate cut. The average lending rate on fresh rupee loans declined 43 basis points to 8.28% in December, the steepest month-on-month fall in six months. However, the average rate on new term deposits rose 8 basis points to 5.67%. The weighted average lending rate of scheduled commercial banks has moderated by 105 basis points since January, compared with a cumulative125-basis-point reduction in the policy repo rate. The average deposit rate on new term deposits fell 95 basis points over the same period.

Bank credit to industry rose 13.3% year-on-year as of December 31, up from 9.6% a month earlier and 7.5% a year ago. Credit to the services sector also accelerated to 15.3% from 11.7% a month ago and 11.5% a year ago. Growth in credit to the agriculture sector also increased 12.1% from 8.7% a month ago, though it was marginally lower than 12.5% a year ago.

India’s services trade surplus widened to $22.67 billion in December from $17.39 billion in November, as services exports rose 13.0% year-on-year to $41.78 billion and imports increased 7.3% to $19.10 billion.  The merchandise trade deficit in December was $25.05 billion, leaving an overall deficit of $2.38 billion.

Annual inflation based on CPI for Industrial Workers rose to a four-month high of 3.13% in December from 2.56% in November, mainly reflecting a low base and a 0.6% month-on-month increase in the miscellaneous index. CPI (Urban), a separate but comparable measure, rose to 2.03% in December from 1.40% in November.

 

Bank credit growth moderated to 13.1% year-on-year as of January 15 from an 18-month high of 14.5% as of December 31. Deposit growth also eased to 10.6% from 12.7% over the same period, partly reflecting quarter-end balance sheet adjustments by banks.

 

Renewable energy generation, including large hydroelectric projects, rose 16.6% year-on-year to 32.10 billion units in December, driven by a 39.6% jump in solar energy output to 14.95 billion units. Wind generation contracted 12.8% to 5.01 billion units, while output from large hydro projects rose 13.1% to 8.77 billion units. Total electricity generation, including thermal and nuclear sources, increased 6.5% year-on-year to 149.74 billion units. Renewables accounted for 21.4% of total generation, up from 19.6% a year earlier.

Winter rainfall has remained patchy so far. The country received cumulative rainfall of 11.7 mm during January 1-30, 29% below the long-period average of 16.5 mm for the period.

Reservoir storage levels remained comfortably above historical averages, reflecting strong monsoon and post-monsoon rainfall. As of January 29, water levels in 166 reservoirs stood at 126.35 billion cubic metres, or 69% of their total live capacity — 8% higher than a year earlier and 24% above the 10-year average.

 

With the sowing season nearing completion, the area under rabi crops stood at 66.05 million hectares as of January 23, up 2.8% from a year earlier. Sowing has exceeded the normal area, covering 103.6% of the norm. Wheat acreage rose by 1.9% to 33.42 million hectares, while the area under pulses and oilseeds increased 2.7% to 13.76 million hectares and 3.7% to 9.70 million hectares, respectively, pointing to a broadly favourable rabi outlook.

 

Coming up

• Feb 2 – HSBC India Manufacturing PMI for January 
• Feb 3 – HSBC India Services, Composite PMI for January
• Feb 12 – Consumer Price Index for January

Tailpiece
Gold reserves with the RBI have risen by $45 billion to $123 billion in the current financial year, driven entirely by higher gold prices, as the central bank’s physical gold holdings have remained unchanged at 880 tonnes.