Week in Numbers: Tracking India’s Economic Pulse

Retail inflation rose to a three-month high of 1.33% in December from 0.71% a month earlier, remaining below the Reserve Bank of India’s 2-6% tolerance band for the fourth consecutive month. On a month-on-month basis, CPI rose 0.1%. The uptick was driven by an unfavourable base effect and higher gold and silver prices. However, inflation undershot the consensus estimate of 1.5%, largely due to falling food prices, particularly vegetables.

After touching a record low of 0.25% in October, retail inflation has been rising as the base effect turned unfavourable.

 

Core inflation, which excludes food and fuel, rose to a 28-month high of 4.6% in December from 4.4% in November, driven mainly by a sharp rise in precious metal prices. Inflation in gold and silver stood at record highs of 68.7% and 97.1%, respectively. Core-core inflation, which also excludes precious metals and auto fuels, fell to a record low of 2.4%, indicating that underlying price pressures remained benign.

CPI inflation averaged 0.8% in October-December, 20 basis points higher than the RBI’s forecast of 0.6%, but remained below the tolerance band for a second consecutive quarter. Under the RBI Act, the central bank is deemed to have failed to meet its mandate if inflation stays outside the 2-6% range for three consecutive quarters.

Retail inflation was expected to rise sharply in the coming months because of the base effect. However, with the rollout of a new series with 2024 as the base year in February has clouded the outlook. The new CPI series, based on the Household Consumption Expenditure Survey 2023-24 (Aug-Jul), is expected to lower the weight of food items in the CPI basket, potentially reducing volatility.

With the RBI projecting CPI inflation to rise to 4.0% by the July-September quarter, the Monetary Policy Committee is unlikely to be swayed by the latest data.

 

Wholesale price inflation rose to an eight month high of 0.83% in December from a contraction of 0.32% a month earlier, driven by broad-based price increases and an unfavourable base effect. Unlike retail prices, wholesale prices showed strong upward momentum, with WPI rising 0.7% month-on-month, the sharpest increase in 14 months.

Unlike CPI, WPI recorded sequential increases in both food and vegetable prices, which rose 0.5% and 4.3%, respectively. In contrast, the corresponding CPI indices declined 0.2% and 2.9%.

WPI core inflation rose to a near-three-year high of 2.0% in December from 1.5% in November.

   

 

India’s merchandise trade deficit widened to $25.05 billion in December from $20.63 billion a year earlier, as imports outpaced exports. The deficit stood at $24.53 billion in November.

Exports rose 1.9% year-on-year to $38.51 billion, while imports climbed 8.8% to $63.56 billion. Export growth was led by electronic goods, which rose 16.8% to $4.17 billion. Engineering goods, the largest item in India’s export basket, increased 1.3% to $10.98 billion, while petroleum products exports fell 6.5% to $4.40 billion.

On the imports side, electronic goods rose 22.2% to $10.19 billion, petroleum and crude increased 6.0% to $14.41 billion, gold imports fell 12.1% to $4.13 billion, and silver surged 79.7% to $758 million.

The US remained by far India’s largest export destination despite the 50% tariffs imposed on Indian goods in August. India exported $6.89 billion worth of goods to the US in December, down 1.8% year-on-year. While exports to the US declined 0.8% to $25.60 billion in September-December, shipments rose 9.8% to $65.88 billion in April-December.

   

Wholesale automobile sales jumped 35.9% year-on-year to 2.00 million units in December, supported by year-end discounts, anticipated price hikes in 2026, and goods and services tax cuts.

Passenger vehicle dispatches rose 26.8% to 399,216 units, while two-wheeler wholesales surged 39.4% to 1.54 million units, the fast growth in over three years. Vehicle production climbed 37.1% to 2.63 million units, pointing to inventory rebuilding in anticipation of sustained demand.

 

India’s unemployment rate rose to 4.8% in December from an eight-month low of 4.7% a month earlier. Youth unemployment (ages 15-29) increased to 14.4%, while urban youth unemployment rose to 18.1%. The labour force participation rate for those aged 15 and above rose to an eight-month high of 56.1% in December from 55.8% a month earlier.

 

Bank credit growth surged to an 18-month high of 14.5% year-on-year as of December 31, from 11.7% a fortnight earlier.  Deposit growth also jumped to 12.7% to from 9.4% over the same period. The increase partly reflects banks’ expanding balance sheets at the end of the quarter to report stronger growth.

 

 

Overseas direct investment by Indians declined 18% year-on-year to $3.75 billion in December, compared with $2.16 billion. Equity investments rose 24% to $1.88 billion, while loans fell 33% to $524 million and guarantees declined 41% to $1.35 billion.

India’s foreign exchange reserves rose by $392 million week-on-week to $687.19 billion as of January 9, driven by valuation gains in gold. Foreign currency assets declined by $1.12 billion to $550.87 billion, while gold reserves increased by $1.57 billion to $112.83 billion. Overall, reserves have risen by $18.87 billion so far in 2025-26, largely due to higher gold prices.

 

Food grain stocks with the government were at record highs. As of January 1, rice stocks in the central pool stood at 30.94 million tonnes, the highest ever for the period. Total rice stocks, including unmilled paddy, were also at a record 67.93 million tonnes. Wheat stocks stood at 27.46 million tonnes, the highest level for January 1 in four years. Total grain stocks, including unmilled paddy, rose 17% year-on-year to a record 95.40 million tonnes. The elevated stock levels will help the government intervene to prevent sharp price increases.

 

 

The rainfall during the winter season has been patchy so far. The country received a cumulative rainfall of 1.9 mm during January 1-16, 77% below the long-period average of 8.2 mm for the period.

Reservoir storage levels remained healthy and well above historical averages, thanks to good monsoon and post-monsoon rainfall. As of January 15, 166 reservoirs held 134.91 billion cubic metres of water, accounting for 73% of their total live capacity. Storage levels were 7% higher than a year earlier and 24% above the 10-year average.

 

 

With rabi sowing nearing completion, the area under crops stood at 64.43 million hectares as of January 9, up 2.8% year-on-year. Sowing has covered 101% for the normal acreage of 63.78 million hectares. Wheat acreage rose by 1.9% to 33.42 million hectares, while pulses and oilseeds increased 2.8% to 13.64 million hectares and 3.8% to 9.69 million hectares, respectively.

 

Coming up

• Jan 20 – Index of Eight Core Industries for December
• Jan 23 – HSBC India Flash PMI for January
• Jan 28 – Index of Industrial Production for December

Tailpiece: Passenger vehicle sales hit a record high in calendar year 2025 at 4.49 million units, up 5.0%. Two-wheeler sales rose 4.9% to 20.50 million units, though they remained below the 2018 peak.