India Economic Monitor

BCG’s India Economic Monitor shares insights on the state of Indian Economy from the most recent month, capturing 30+ key macroeconomic indicators and comparing them with trends observed in recent months. These indicators include industrial activity, trade, financial services, economic sentiments and sector-wise trends.

Brief Summary for Latest Report

• High-frequency indicators exhibited varying trends in Dec’25-Jan’26 amid year-end normalization and global headwinds. IIP surged in Dec’25, driven by strong growth in electricity and construction goods, with cement production rising sharply to a 9-month high. Average power consumption increased in Jan’26, driven by higher heating appliance usage, while steel consumption inched down driven by a decline in the non-alloy steel category. The auto sector witnessed a positive start to the year in Jan'26 across categories amid strong consumer demand. Air freight volumes and e-way bill generation edged down slightly in Jan'26, while air passenger traffic and JNPA volumes inched up.
• Merchandise trade dynamics weakened in Jan’26, with the deficit widening sharply to $34.7 Bn as gold and silver imports surged and exports declined. In contrast, services trade surplus strengthened to $24.3 Bn, supported by faster growth in exports than imports. Forex reserves also increased markedly in Jan’26, led by gains in gold holdings, foreign currency assets, and SDRs. Meanwhile, FDI remained stable in Dec’25 as equity inflows improved, although repatriation also rose.
• BFSI indicators were broadly positive in Dec’25-Jan’26. Aggregate credit strengthened driven by higher loans, cash credit and overdrafts, while deposits rose mainly on an uptick in demand deposits. UPI transaction volumes and values hit a new record in Jan’26 as digital adoption continued to expand. Mutual fund AUM also marked a record high in Jan’26, led by hybrid and other schemes. Insurance premiums were steady overall: non-life premiums edged up, while life insurance moderated. Market activity picked up post year-end, with NSE and BSE transactions rebounding in Jan’26 on improved liquidity and stronger retail participation. Meanwhile, India VIX rose to an 8-month high as global cues, earnings reactions and rupee weakness lifted near-term volatility expectations.
• On the macro side, GST collections strengthened in Jan’26 on resilient domestic activity, while the fiscal position improved to a ₹1.2 Tn surplus in Dec’25, driven by a cyclically stronger tax and non-debt receipts. Inflation firmed in Jan’26, with WPI rising to a 10-month high of 1.8%, while CPI stood at 2.8% under the revised base year series. The nominal exchange rate weakened to 90.8 per USD in Jan’26 amid portfolio outflows and a stronger USD, even as the real effective exchange rate improved. MGNREGA work demand rose cyclically to a 7-month high in Jan’26, while the employment rate edged down seasonally in both rural and urban segments. Economic activity gained momentum, supported by a rebound in both manufacturing and services PMIs. Consumer sentiment diverged, as urban future expectations moderated while rural expectations remained stable. Analysts continue to project FY26 GDP growth of 6.5–7.5%.