India’s retail inflation, based on the Consumer Price Index (Combined), rose to a 20-month high of 4.82% in August, primarily due to higher food prices and courier and parcel delivery charges. Retail inflation was 4.45% in July and 2.01% a year earlier.

The overall CPI rose 0.7% month-on-month, driven by a 1.2% rise in food prices and a 6.4% increase in courier and parcel delivery service charges. Food inflation rose to 5.95% in August from 5.52% a month earlier, while inflation in courier and parcel delivery services increased to 14.64% from 7.77% a month earlier.

The rise in food inflation was driven by sugar and vegetables, whose prices rose 7.6% and 3.5% sequentially, respectively.

Within the CPI basket, inflation was 15.17% in personal care, social protection and miscellaneous goods and services, led by a 107.11% year-on-year increase in silver jewellery prices and a 35.53% rise in gold jewellery prices.

Core inflation rose to 4.2% in August from 3.9% a month earlier. However, with the southwest monsoon remaining deficient and tensions in West Asia continuing, there is an increasing risk that food and energy inflation will remain elevated in the coming months.

With the US Federal Reserve’s Federal Open Market Committee raising interest rates by 25 basis points, expectations of a 25-basis-point interest rate hike by the Reserve Bank of India in October have increased.

 

 

India’s annual inflation rate, based on the Wholesale Price Index, rose to 9.92% in August from 9.78% a month earlier. The rise was mainly due to an increase in wholesale prices of mineral oils and crude petroleum and natural gas during the month as the conflict in West Asia escalated. The increase in prices pushed annual inflation rates in mineral oils and crude petroleum and natural gas to 38.5% and 34.4%, respectively, in August.

Among the three broad groups, annual inflation was 7.8% in primary articles, 22.9% in fuel and power, and 8.4% in manufactured products.

WPI inflation remains significantly higher than CPI inflation, partly because the increase in petroleum product prices has not been fully passed through to consumers. Lower retail inflation also reflects manufacturers’ inability to fully pass higher commodity costs on to consumers.

India’s annual inflation rate, based on the newly introduced Output Producer Price Index, rose to a record 9.81% in August from 9.57% in July. Output PPI inflation has closely tracked WPI inflation in recent months. Over the last 29 months, the average difference between the two measures has been just 0.06 percentage points.

India’s merchandise trade deficit narrowed to a five-month low of $26.86 billion in August from $31.85 billion in July and $27.22 billion a year earlier. The decline was primarily due to exports growing much faster than imports in August. Merchandise exports rose 26.1% year-on-year to $43.81 billion during the month, the fastest pace in 50 months. Imports rose 14.1% to $70.67 billion.

Export growth in August was driven primarily by electronic goods, petroleum products, and engineering goods. Exports of electronic goods increased 89.8% to $5.55 billion, while petroleum product exports rose 63.3% to $6.81 billion. Engineering goods exports rose 24.9% to $12.32 billion during August.

Meanwhile, imports of electronic goods increased 40.5% to $13.66 billion, and crude oil and petroleum product imports rose 25.8% to $16.69 billion.

Gold imports in August contracted 57.7% to $2.30 billion following the sharp increase in import duty on the precious metal.

 

India’s current account deficit widened to $7.0 billion in July from $6.2 billion a month earlier, mainly due to a wider merchandise trade deficit and a lower services trade surplus. The current account deficit was $3.2 billion in July last year.

The capital account recorded a surplus of $27.7 billion in July, sharply up from $9.1 billion a month earlier, primarily due to a sharp increase in banking capital to $18.4 billion from $8.2 billion a month earlier, driven by strong inflows under the special schemes announced by the Reserve Bank of India to attract foreign exchange. The capital account recorded a surplus of $3.6 billion in July last year. Net foreign direct investment of $7.3 billion and foreign portfolio investment inflows of $4.1 billion also boosted the capital account.

The current account recorded a deficit of $11.2 billion in April-July, up from $6.6 billion a year ago. The capital account recorded a surplus of $23.9 billion in the first four months of 2026-27, sharply up from $11.4 billion a year ago. With Foreign Currency Non-Resident (Bank) deposits rising strongly in August following the hedging window provided by the Reserve Bank of India, the capital account surplus is expected to rise sharply during the month.

Growth in automobile dispatches remained robust even as it moderated sharply in August. Total automobile dispatches rose 14.6% year-on-year to 2.57 million units, posting double-digit gains for the tenth consecutive month. The growth in total dispatches was sharply lower than 25.0% a month earlier as many companies increased prices to offset higher commodity costs.

Passenger vehicle dispatch growth increased to a multi-year high of 36.5%, with dispatches at 439,309 units in August. Growth in two-wheeler dispatches moderated to 10.5% in August, with dispatches at 2.03 million units, from 22.6% a month earlier, primarily due to a sharp slowdown in motorcycle sales. Growth in motorcycle dispatches slowed to 2.4% in August from 20.7% a month earlier. However, scooter dispatch growth remained buoyant at 23.8%.

Within the passenger vehicle segment, utility vehicle dispatches rose 39.2% to 250,084 units, while car dispatches increased 23.8% to 112,011 vehicles.

The country’s unemployment rate fell to a six-month low in August, driven primarily by a sharp fall in rural unemployment. The unemployment rate fell to 5.0% in August from 5.1% a month earlier. The rural unemployment rate fell to 4.1% from 4.5%, while the urban rate increased marginally to 6.8% from 6.7%.

The unemployment rate among youth fell to 15.1% in August from 15.6% a month earlier, while unemployment among rural youth fell to 13.3% from 14.1%. However, unemployment among urban youth increased marginally to 18.7% in August from 18.6% a month earlier. Unemployment among young urban men increased to 16.2% from 15.9%.

Meanwhile, the overall labour force participation rate — the share of the working-age population that is employed or actively seeking work — increased to 55.6% in August from 55.4% a month earlier.

 

 

India’s coal production declined 3.8% year-on-year to 66.87 million tonnes in August, the fourth contraction in the last six months. Coal dispatches in August rose 5.5% to 81.87 million tonnes. Though coal demand from thermal power plants has moderated with higher renewable energy output, demand has remained robust over the last four months. Coal dispatches to the power sector, which accounts for about 80% of total coal dispatches, increased 3.7% year-on-year to 65.63 million tonnes in August.

 

India’s foreign exchange reserves fell marginally in the week to September 11 after touching a record high in the previous week. As of September 11, foreign exchange reserves fell by $4.92 billion from a week earlier to $780.78 billion. Foreign currency assets declined $2.37 billion to $645.80 billion, while gold reserves declined by $2.59 billion to $111.23 billion due to a fall in gold prices.

Foreign exchange reserves had risen to a record $785.71 billion in the week to September 4, supported by strong inflows under the special schemes announced by the Reserve Bank of India to attract foreign exchange. Through August 31, banks had raised $136.38 billion through the special swap facility.

 

Rice and wheat stocks with the government remained high, providing a cushion against a possible decline in foodgrain production due to the deficient southwest monsoon. Total foodgrain stocks, including unmilled paddy, stood at 107.65 million tonnes as of September 1, the highest level for the period on record. Rice stocks were at 39.05 million tonnes, the highest for the period on record, while wheat stocks were at 47.99 million tonnes, the highest level for September 1 in five years. The government held 30.75 million tonnes of unmilled paddy, equivalent to about 20.60 million tonnes of rice.

 

Reservoir storage increased marginally from a week ago, even as the gaps with last year’s level and the 10-year average widened. As of September 17, live storage in 178 reservoirs increased by 0.62 billion cubic metres from a week earlier, compared with an increase of 2.21 billion cubic metres in the corresponding week last year and an average increase of 3.95 billion cubic metres during the corresponding week over the previous 10 years. Live storage rose to 131.69 billion cubic metres, accounting for 71% of total reservoir capacity. Storage was 21% below last year’s level and 9% below the 10-year average. Reservoirs are typically replenished during the southwest monsoon.

 

India’s southwest monsoon continued to be deficient. As of September 18, cumulative rainfall across the country was 691.9 millimetres, or 85% of the long-period average. Among the four regions, rainfall was 72% of the long-period average over the South Peninsula, 75% over East and Northeast India, 91% over Northwest India, and 94% over Central India. Rainfall was 65% of the long-period average in June, 101% in July, and 84% in August, while it was 79% of the long-period average so far in September.

Kharif sowing continued to lag year-on-year as the southwest monsoon remained deficient. The total area sown under kharif crops was 110.39 million hectares as of September 18, down 1.3% from a year ago. Rice acreage declined 3.7% to 42.93 million hectares. Area under pulses rose 1.4% to 11.97 million hectares, while coarse cereals increased 0.6% to 18.58 million hectares. Oilseed area was 19.48 million hectares, unchanged from a year ago. Among cash crops, sugarcane acreage declined 0.7% to 5.85 million hectares, while cotton area fell 0.9% to 10.96 million hectares. The area sown so far accounted for 100% of the normal kharif area of 110.45 million hectares.

Coming up

• September 21: Index of Nine Core Industries for August 
• September 23: HSBC India Flash PMI for September 
• September 28: Index of Industrial Production for August 

Tailpiece
India had a trade surplus of $14.70 billion with the US in April-August despite the unilateral tariffs announced by Washington. The surplus was, however, lower than $18.63 billion in the same period last year.