• Corporate Tax collections see strong growth during the June quarter

• Personal Income tax collections recover but remain modest

• GST collections growth at highest since September last year

• Services exports decelerate sharply in May

• FX reserves have steadily declined to 15-month low

• UPI payments will equal India’s nominal GDP in the current year

Corporate tax collections have seen strong growth in the first two months of this financial year. While April saw high-teens growth in corporate tax collections, May saw over 30% growth in collections. Cumulatively, thus, the first two months have seen 25% growth in corporate tax collections. And these two months had seen significant macro headwinds with higher oil prices and a falling rupee. So strong growth in corporate tax collections despite these headwinds suggests resilient underlying corporate profitability growth.

In contrast, personal income tax collections remain weak. They have seen a modest 7% growth in collections so far this year, implying they are even undershooting the nominal GDP growth, which is likely to have been in the low double digits during this period. However, this is an improvement from the almost 10% decline seen during the March quarter. So, while growth is modest, it is still an improvement.

GST collections, however, ticked up. After a decline in May, overall GST collections grew 5.5% YoY in June. This is the highest growth since September last year. Recall that the government had rationalised and cut the GST rates effective September last year. And since then, GST collections had understandably been subdued – even declining in a couple of months. That they are now seeing an uptick even before the rate cuts are in the base suggests improving underlying momentum.

May was a bad month for services exports. They grew a modest 3% YoY, which is the slowest growth in the last few months. The previous few months had seen ~10% growth each month. So, this is a fairly sharp deceleration in growth.

More importantly, imports grew faster than exports at 6% YoY, which led to the services surplus declining YoY for the first time in over 2 years. A lower services surplus when the merchandise deficit was high due to higher oil prices and negative portfolio flows would have been a contributory factor to the pressure on the rupee.

FX reserves have been declining in recent weeks. As of the last Friday of June, India’s FX reserves stood at US$667bn, the lowest since March last year. From its peak in February this year, reserves are down by over US$60bn. And it is not just Gold which is contributing to the fall in reserves. While the decline in the price of Gold is dragging down reserves, foreign currency assets have also fallen.

Of the US$61bn decline in reserves since February this year, roughly half is due to lower foreign currency assets and another half is due to the decline in value of Gold holdings – RBI’s physical gold holdings having remained unchanged (latest data as of end of May).

Lastly, the remarkable growth in UPI payments continues. While the growth rate has slowed down from the 40-50% growth of 2023-24, it has stabilised at ~20% for the last few quarters now. June itself saw 20% YoY growth in payment value.

At this rate for the full year FY27, the value of UPI payments will be equal to India’s GDP. A decade ago, in FY16, UPI payments were basically zero. And just 5 years back, in FY22, UPI payments were just about a third of India’s GDP. And it is on this base (~US$300bn of spend a month) that UPI is still seeing 20% growth every single month.

That’s it for this week. See you next week…

• Oil prices almost back to pre-war levels

• April saw the second highest FDI inflow on record

• Outward FDI also picked up in April but the trend is decelerating

• Credit growth continues to accelerate, across sectors

• RBI’s Gold holdings data for May is out!

• Strength in formal business creation continues

• Rains now replace Oil as the macro worry

International oil prices continue to trend down. So far in June, the Indian basket of crude oil has averaged US$86/bbl, down from ~US$90/bbl as of last week. And on Friday, the price was US$71/bbl, just 10% higher than the pre-Iran war price. So oil prices, if they stay at these levels, have all but normalised to pre-war levels. And while the rupee has depreciated in the meantime, the stress on inflation, current account and the fisc should substantially reduce, if not fully normalise. And that is good news.

And April was a record month for FDI. The actual equity FDI inflows totalled US$12.4 bn in April, the second highest on record. The highest was in August 2020 when Reliance Jio raised equity. And in the three months before April (Jan-Mar quarter), FDI inflows were up 50% YoY. At the same time, repatriation of existing FDI has plateaued off. Annualizing the outflow during the first 4 months suggests, total repatriation for the full year 2026 will be flat YoY for the second consecutive year.

On the flipside, the strong momentum on outward FDI has continued. April saw almost US$5bn of outward FDI by Indian businesses, up 50% YoY. However, in general, outward FDI seems to be moderating. In the first 4 months of 2026, outward FDI has actually declined modestly on YoY basis. So, while the large inflow in April is probably an outlier, FDI has been trending up, on both gross and net basis. That said, this recovery is from a low base and thus this trend needs to sustain for several quarters before FDI gets to a reasonable share of GDP.

Credit growth continues to accelerate. As of mid-June, credit growth stood at almost 18% YoY, almost 4ppt higher than at the start of the year. Deposit growth, however, continues to remain stable at ~12% YoY, and thus, credit growth is outpacing deposit growth by a wide margin.

And while data on the sectoral composition of credit growth, as of the end of April, the drivers were fairly broad-based. Thus, while Industrial sector credit growth has picked up from 7% to 15% over the past year, the Services sector has picked up from 10% to almost 19%. And personal loans from 12% to 16%. Even Agriculture has seen credit growth pick up from 9% to 14% over the past year.

There was a bit of a brouhaha a few weeks ago over the RBI’s Gold holdings and whether the RBI had sold gold, which it holds as part of its FX reserves. While the RBI had issued clarification that it had not done so, data released this past week on the actual physical gold holdings should finally put the matter to rest. As of May 29th, the RBI held 880.52 tonnes of Gold, unchanged since early April and slightly higher than its holdings as of the end of March, which were 880.34 tonnes. So that is that.

But the bigger question is, if RBI routinely uses its reserves to intervene in the FX market, how does it matter whether it uses its holdings of US Treasuries or Gold? Reserves are reserves and intervention is intervention…

The strength in formal business creation has continued through into this year. In the first 5 months of this year, around 160k new formal businesses were set up. This is an increase of almost 20% on a YoY basis. Note that 2025 itself had seen over 30% growth in formal business creation. At this rate, 2026 will see almost 400k new formal businesses being created. For reference, a decade back in 2016, India had seen just 120k new formal businesses being created.

Lastly, the monsoon. And it has got off to a fairly poor start. Till yesterday, the cumulative rainfall so far in June is 43% below normal, with Central India (Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Odisha) seeing the biggest deficit in rainfall.

The region has received rainfall 56% below normal, while South India has also seen a 31% deficit in rainfall so far in June. East India has also seen over 40% deficit in rainfall so far. So, even as one risk to the economy (Oil prices) has receded, another (rains) is rearing its head.

That’s it for this week. See you next week…

• CPI Inflation rises with both Food and Non-Food ticking up

• Oil prices are now almost back to pre Iran war levels

• Exports and Imports grow strongly in May driven largely by Commodities - Oil and Gold

• Electronics exports saw a slowdown and have grown slower than imports in Apr-May

• Consumption of petroleum products declined by over 7% in May, the shrpest decline in two decades driven primarily by LPG

• Power generation grew in double digits in May, driven by both renewable and thermal power

CPI inflation edged towards 4% YoY in May, rising to 3.9% YoY from 3.5% YoY in April. This is the highest level since February last year. Food inflation continues to be the key driver of headline inflation – it rose 50bps to 4.5% YoY in May. However, non-food inflation, which had remained stable around 3% for the last few months, also rose to ~3.5% YoY in May.

The good news, though, is that oil prices have corrected significantly in recent days. The price of the Indian basket of Crude oil, which had averaged ~US$115/bbl in March and April, has fallen to under US$90/bbl so far in June, and on Friday was closer to US$75/bbl. Before the hostilities started in the Middle East, the price of the Indian basket or crude oil was averaging US$60-65/bbl.

So, oil prices are now just 10-15% away from their pre-Iran war levels. Assuming this trajectory holds, this removes a key upside risk to inflation and the economy. The other risk – below normal rains – remains, and we will see how it plays out over the next few weeks.

Merchandise exports rose 18% YoY in May, the strongest growth in the last few months. This was driven by over 50% growth in Petroleum exports, excluding which export growth was a relatively modest 12% YoY. Engineering goods exports also saw strong growth of almost 25% YoY; exports of Electronics goods saw only a modest growth of 12% YoY. Textile exports declined YoY and were the key drag on export growth.

Imports saw an even stronger growth at 20% YoY in May driven largely by over 50% growth in Petroleum imports. Excluding Petroleum, imports grew 10% YoY. Gold imports rose by over 30% YoY in May, and even imports of electronic goods grew by over 30% YoY, a faster growth than the growth in exports.

Consequently, the trade deficit widened by over 25% YoY. That said, with Oil prices having fallen sharply now, as mentioned earlier, some of the worries over the trade deficit have subsided. The current account balance will still increase in FY27, but not as sharply as previously anticipated.

Domestic consumption of petroleum products declined almost 7% YoY in May. Outside of the Covid19 pandemic, this magnitude of decline was last seen in 2003, more than 20 years ago! And LPG continues to be the key drag – LPG consumption declined 20% in May, the third consecutive month of double-digit YoY decline and the sharpest decline on record. Outside of the last 3 months, LPG consumption has never declined in double digits in the last 3 decades for which we have monthly data – not even during the COVID-19 pandemic.

But the slowdown is across the board. Naphtha consumption has declined in double digits, as has Bitumen in the last two months. And while Diesel consumption has not declined, it has slowed to ~1% YoY in April and May, down from 5% growth during the Jan-Mar quarter. Even the growth in petrol consumption halved to just over 3% in May from almost 7% between January and April.

Lower petroleum consumption and soaring temperatures are driving up power generation. Power generation grew 12% YoY in May as per provisional data, the highest growth in recent years. While renewable power generation grew over 30% YoY, even thermal power generation grew by almost 9% YoY, once again, the highest in recent months.

Given that monsoon rain is delayed this year, June also promises to see strong growth in power generation.

That’s it for this week. See you next week…

• RBI keeps interest rates unchanged. As expected. But things are changing. As expected.

• Households are getting anxious about the economy, both in rural and urban areas.

• Corporate profits saw strong growth in 4Q, driven primarily by lower financial leverage

• Corporate tax collections saw strong growth in April

So, as expected, the RBI’s Monetary Policy Committee maintained the status quo on interest rates. The repo rate remains at 5.25%, a level it has remained since December last year. The stance of monetary policy also remains neutral, implying rates could go either way from here. And, both of these, were unanimous decisions. All as expected.

But as we have said before, under the hood, things are changing and changing in opposite directions, which creates conflicting challenges. And the RBI’s forecasts exemplify them. On one hand, the RBI has downgraded GDP growth estimate for this year – from 6.9% in April to 6.6% in June – and on the other hand, it has increased its inflation projection for this year – from 4.6% in April to 5.1% in June.

And there are two drivers for both of these changes. One, the higher commodity prices due to the conflict in the Middle East. And two, the expectation of below normal rainfall. The Middle East disruption has lasted longer than expected, when the conflict first erupted. It remains a binary event – an issue that can resolve tomorrow, but that tomorrow has, as yet, not come. And the monsoon, we shall know in the next couple of months if the forecast is likely to materialise.

One of the things the RBI does every two months is run a consumer confidence survey. And the latest results of the survey present a sobering picture. In urban areas (major cities), the perception of how robust the economic situation is, has fallen to almost a 3-year low. Their assessment of income has deteriorated sequentially, but is broadly same as it was last year. For example, the percentage of households that report that their income has increased or decreased has remained the same as last year.

And on the rural side, a similar picture is seen. Perception about economic situation has fallen sharply, while assessment of income has similarly worsened sequentially, it is not at alarming levels. The risk, though, is that if their anxiety about the economy builds, then even if it does not immediately impact incomes, it might impact consumption, and that will cascade through to incomes and employment.

Lastly, the 4Q reporting season just ended. And on an aggregate basis, it was a fairly strong quarter. While revenue growth was modest at 10%, slower than the 11-12% growth in the preceding 2 quarters, profit growth was very strong. Reported profits grew over 20% YoY, the strongest growth in over 2 years.

This was largely driven by lower interest costs. Debt equity ratio continues to trend down, and with interest rates having fallen through FY26, it is now flowing through to P&L through lower interest expense. Interest cost declined from 2.6% of revenue to 2.3% of revenue, driving the PAT growth. Operating margins (EBITDA margin) remained almost stable on a YoY basis.

And the current quarter might also turn out to be strong for corporate profitability – corporate tax collections grew 17% YoY in April, the strongest growth in recent months. But this is just one month, so we shall see…

That’s it for this week. See you next week…

• Bank credit growth has continued to accelerate even as deposit remains stable

• Migration from India has been slowing

• Services export growth remains resilient

• Wireless subscriber growth remains strong; Airtel seeing stronger growth than Jio

Credit growth continues to see an uptick. As of mid-May, overall bank credit growth had ticked up to 16.2% YoY, the highest in the last few years and up from ~14% at the start of the year. Deposit growth has, however, not seen any commensurate uptick, and thus the gap between credit and deposit growth has widened to almost 4ppt. The credit-deposit ratio is now in the 80s, and this is when we are in the lean period for credit growth – credit growth generally tends to be stronger in the second half of the year.

This, coupled with an uptick in inflation and possibly higher fiscal deficit (hint – higher government borrowings) due to lower petroleum tax collections, will make liquidity management challenging for the RBI in the next few months. So monetary policy will not just be about interest rates in the next few months.

There is often talk of migration out of India. There is no official data on the scale of migration of people. But a useful proxy is the net number of people arriving in India at airports (basically arrivals minus departures). Land or sea-based inter-country movement of people is limited, so most of the inter-country movement of people is through airports. So, this is a good proxy if not a precise number.

And by this metric, FY26 saw the lowest migration in recent years. Just over 800 thousand people left India during the year, down from 1.2 million in FY25 and a peak of 2.1 million in FY23. This lower migration possibly reflects a combination of factors – lower onshore movement in IT due to the H1B Visa and other issues, possibly also a lower number of children migrating for education.

Linked to this is the topic of services exports, most of which are IT exports. And last week we got the provisional data for April. And exports don’t seem to be seeing any slowdown. Services exports grew 13% YoY in April, the fastest growth since December last year and above the average monthly growth of 10-11% seen in the last 2-3 years. So far, the data is not showing any adverse impact of AI on India’s IT exports.

And services imports grew 9% YoY, resulting in continued mid-teens growth in services surplus. The first 4 months of the year have seen services trade surplus average just under US$20bn a month, up 14% or ~US$10bn on a YoY basis.

Lastly telecom. And the momentum in wireless subscriber additions continues. April saw over 6 million new subscribers being added by the wireless operators. Even after Airtel’s restatement of subscribers in November (which resulted in a big increase in its subscriber base by over 60 million), the last few months have seen ~7 million net wireless subscribers being added every month. Between January and October 2025, this used to average just over 2 million net subscribers every month. So, a multi-fold increase in subscriber growth.

Jio and Airtel continue to drive this growth in subscribers, but Vi has finally stopped haemorrhaging subscribers. It has seen (modest) subscriber additions in the last 3 months after sustained subscriber loss in the preceding few years. Also worth noting is that Airtel has been gaining market share, and at 38%, its market share in the subscriber base is only marginally lower (~1.5ppt) than that of Jio. At its current rate, Airtel will catch up with Jio in the next 12 months.

That’s it for this week. See you next week…

• FDI Inflows into India are very low, but this has been the case for 3 years

• FDI is being dragged not so much by lower inflows but higher repatriation and outward FDI

• Retail fuel prices have increased ~4% in last few days, modestly pushing up CPI

• While FX reserves have fallen, they remain fairly close to long-term average

Let us start with FDI. There has been a lot of discussion about how FDI in India has fallen, and the absence of this buffer against FPI outflows is a key contributor to the rupee’s sharp depreciation. This is largely a fair argument. In FY26, for instance, the net FDI inflow was a modest US$8bn. That’s just 0.2% of GDP. Five years back, in FY21 – the peak year for FDI, the net FDI was US$44bn. A decline of 80%!

But this is not a new development. Regular readers of this newsletter would recall multiple occasions over the past couple of years. Indeed, one of the earliest comments on weak FDI that we had made was way back in June 2023, almost 3 years ago. The reason we need to bring this up is not to self-gloat, but because we are now discussing weak FDI when FDI has started to recover.

FDI inflows rose in FY25 after a few years of decline. And in FY26, the financial year that just ended, they rose over 20% and reached the highest ever. In FY26, the actual inflow of FDI into India (without counting reinvested earnings, which is a contra entry) was US$62bn – a 33% jump in 2 years and higher than the FY21 peak of US$61bn. Over the past 15 years, the FDI equity inflows, relative to GDP, averaged 1.7% of GDP. And in FY26, it totalled 1.6% of GDP. Only a shade lower. Of course, there were years when FDI was substantially higher than this (most notably FY21 – the year that saw the large capital raising by Jio Platforms). But equally, there were years when FDI was lower than this.

The real problem in the last few years, and one that has persisted through FY26, has been outflows of FDI – both repatriation of existing FDI and outward FDI by Indian businesses. FY26 saw over US$50bn of FDI being repatriated out of India. This was on top of US$50bn of FDI being repatriated in FY25. In the last 5 years, repatriation of FDI has doubled and now accounts for almost 85% of equity FDI that we receive.

Some of this was the large IPOs with an outsized OFS component, with global corporations listing their subsidiaries as well as VC and PE firms exiting through IPOs. But repatriation is slowing down. In FY26, repatriation grew by less than 5%. But what is now hurting is outward FDI by Indian corporates. Outward FDI by Indians increased almost 20% in FY26, reaching US$33bn and is now over half of the actual equity FDI received. And in the last 5 years, outward FDI has more than tripled. Indian corporates investing billions overseas. Now that is something that is not part of the discourse so far.

Retail fuel prices have finally seen an increase in the last couple of weeks. The price of both petrol and diesel has increased by ~4%, which is still an incomplete pass-through of higher international crude oil prices. The direct impact of this increase on CPI inflation will be modest. Petrol and Diesel together have a ~5% weight in the new CPI, and a ~4% increase in prices implies a roughly 20bps increase in headline CPI inflation.

However, as we mentioned last week, the longer Oil prices stay elevated, the more the domestic pass-through, not just for retail fuels but also for industrial fuels, petrochemicals and other petroleum-derived products. Last month’s WPI increase is an important pointer towards it. So as we approach the next monetary policy meeting in early June, the environment before the MPC is dramatically different. While a rate hike is unlikely, if oil prices remain elevated, it will be on the table by the next policy meeting.

Lastly, FX reserves. They continue to remain just under US$700bn. And while they have fallen due to RBI’s intervention to defend the rupee (and partially offset by the increase in value of gold holdings), they are not low. As of March 2026, for instance, FX reserves totalled just over 10.5 months of imports (on a rolling 12-month basis). This is slightly below the last 20-year average of 11 months. Indeed, back in 2013, during the taper tantrum, when the rupee had seen a very sharp decline, FX reserves were just ~7 months of imports.

That’s it for this week. See you next week…

• Exports recover in April driven by Electronics and Petroleum

• Imports surprisingly see only modest growth as Oil imports decline

• Current account deficit likely to touch US$100bn this year

• CPI remains soft but WPI rises sharply suggesting build up of price pressures

India’s exports rebounded in April, growing 14% YoY, according to provisional data. This is the highest growth since November last year. The uptick was driven by a sharp 40% growth in electronics exports and a 35% growth in petroleum exports (largely reflecting the higher price, but prices have risen more than rise in exports). At just over US$5bn, electronic exports are now the third largest component of exports after engineering goods and petroleum products, both of which contributed ~US$10bn to exports in April.

Imports, in contrast, rose just 10% YoY, and what was most noteworthy was that despite the sharply higher oil prices on a YoY basis, Oil imports declined 10% YoY in April. This is quite counterintuitive and suggests difficulty in sourcing crude Oil and products (sharply lower volume of imports), rather than lower domestic demand. On the flipside, electronic imports spiked 38% YoY while gold imports rose 80% YoY. At US$5.6bn, Gold imports in April were the third highest category after Oil and Electronic goods. Gold imports in April were higher than machinery, metal, or Chemicals imports. This possibly explains the recent increase in import duty on Gold.

The April trade data is thus not representative of how FY27 will evolve, if Oil prices remain elevated. As we discussed last week, assuming Oil prices remain at current levels, oil imports on a net basis will likely increase by ~US$70bn on a YoY basis or ~1.7% of GDP.

India’s current account deficit for FY26 is likely to have been ~US$50-55bn, and even if Gold imports drop by 20-30%, we are looking at a current account deficit of over US$100bn for the full year FY27 if oil prices stay at current levels.

And with FPI flows negative, NRI deposit inflows down to a trickle, and FDI still sluggish, there is likely to be a big shortfall on the capital flows side to fund this deficit. So as things stand now, FY27 is likely to be the second consecutive year and the third year in the last 4 to see a balance of payments deficit. This means a further drawdown of reserves, on top of what happened last year (FY26), but was masked by revaluation gains on Gold. And it also means continued pressure on the rupee. Which is again something we have been seeing for the last few months.

But of course, a lot can change in the next few weeks and months. The war in the Middle East might end, and Oil prices can drop to ~US$60-70/bbl. Gold price can also fall. And India benefits – pressure on the rupee eases, sentiment turns around, and FPI flows come back, liquidity improves, inflation pressure comes down, and things cascade the other way round.

The other big data release last week was the CPI inflation. And it remained steady at 3.5% YoY in April, up ~10bps over March. Food inflation continues to run higher, at 4% in April, and thus the non-food CPI is closer to 3%. But price pressures are building. The sharp rise in WPI shows that higher global oil prices are starting to get transmitted to domestic markets despite the retail fuel prices having remained unchanged through April and till last week, when they saw only a modest increase.

The IMD has also forecasted lower than normal monsoon rains this year. And this means that when the RBI meets next in early June, the discussion surrounding monetary policy will change from rate cuts to whether rate hikes are likely. Rate hikes are not imminent, but they are now very much in the air.

And on this somber note, let’s call it a day. See you next week…

• Power Generation picks up supported by Renewables

• Temperatures are rising and South is facing the brunt

• Oil product consumption declines in April, driven by LPG

• Price of India’s basket of crude Oil is at an all-time high in INR terms

• Oil Imports will rise to decadal high this year relative to GDP

• China’s foreign trade continues strong upward trajectory

The soaring heat of the last few weeks has resulted in no appreciable increase in power demand. Power generation grew 5.7% YoY in April on a provisional basis. This is the highest growth so far in 2026 and the second-highest growth in the last 16 months (since the start of last year).

And most of the heavy lifting of meeting the incremental demand is coming from renewable sources. Renewable power generation continues to grow at over 20% YoY. Conventional power generation, in contrast, is basically seeing no growth. In April this year, for instance, the total conventional power generation in the country was 137k GWh, the same level as in April 2024. Consequently, the share of renewables in power generation continues to increase, and in April it was 18%. Two years back, in April 2024, it was just 12%.

The interesting thing about the heat wave is that there hasn’t been one. At least not on a pan-India basis. The average all-India max temperature in April was 0.8 degrees lower than last year. And it was also 0.5 degrees lower than the preceding 30-year average for April.

But there is a clear regional divergence. The heatwave is concentrated in South India, while most of North India is seeing, or saw in April, a relatively milder summer. For example, Kerala and Karnataka saw average max temperatures in April almost 1.5 degrees above last year’s. While Rajasthan and Punjab saw average max temperature in April of almost 3 degrees below last year’s.

The impact of the US-Iran war and the consequent disruption to the Oil market is now visible in overall domestic petroleum consumption. Total consumption of petroleum products declined by 4.6% YoY in April, down from low single-digit growth during the first quarter. LPG consumption declined for the second consecutive month – it declined 13% YoY in April and had declined by a similar amount in March.

Diesel consumption growth also moderated to below 1% YoY in April as compared to ~5% growth during the first quarter. Note that while retail diesel prices have remained unchanged, commercial diesel prices have increased substantially, and the gap between the two has widened by 70-80%. Petrol consumption, however, has remained resilient, growing by 7% YoY in April, broadly the same pace as in the recent few months.

Worth noting is that while in USD terms the price of oil, currently at ~US$115/bbl, is not the highest we have seen, in INR terms it is. In April, the average price of oil for the Indian basket was ₹10,700/bbl, the highest ever. And 90% above the peak of 2008, when it had averaged ₹5700/bbl in July 2008.

On the flipside, the size of the economy has increased significantly, and so oil imports are a lower share of the economy than before. In FY26, for instance, net Oil imports were 3.1% of GDP, as against the last 20-year average of 3.8% of GDP. But given where Oil prices are currently, and if they sustain for the full year, net Oil imports will rise to closer to 5% of GDP, the highest in over a decade.

The last time Oil imports were this high, relative to GDP, was during FY12-14, which were not so good years for the economy. So this increase in Oil prices is a major ongoing risk to the economy, irrespective of whether retail fuel prices increase or not.

Lastly, China’s trade. China’s merchandise trade was surprisingly strong in April, with both exports and imports seeing double-digit growth. Exports rose 14.1% year-on-year to $359.4 billion, a significant improvement from the 2.5% growth recorded in March. Imports grew 25.3% year-on-year to $274.6 billion, continuing the trend of double-digit growth seen since January. The stronger growth in imports relative to exports meant that the trade surplus was down on a YoY basis.

And after 12 months of steady decline, China’s exports to the USA grew in April on a YoY basis. Exports grew 11% YoY, while Imports from China grew 9% YoY, the second consecutive month of growth. Consequently, the trade surplus with the USA widened to US$23bn.

That’s it for this week. See you next week…

• Domestic aviation sector is seeing a sharp slowdown

• While Indigo & Air India are seeing decline, SpiceJet & Akasa are seeing growth!

• Life Insurance Sector is seeing strong growth driven both by LIC and Private insurers

• After 5 years of steady increase in Gold holdings, RBI takes a pause in FY26

• Wireless subscriber addition continues to remain strong and Vi has finally returned to growth

Domestic aviation passenger traffic growth declined by 1% YoY, the weakest performance since December (which was largely due to disruptions at Indigo). February had also seen a modest 0.1% growth in passenger traffic, and thus the last two months have seen fairly weak growth in the domestic aviation sector. With Jet fuel prices having increased further in April, the weak growth is likely to continue.

Both Indigo and the Air India group saw a decline in passenger carried, while smaller airlines like SpiceJet and Akasa saw strong growth. SpiceJet seems to have stabilised its operations and is returning to growth. Its share in passenger traffic has doubled to 3.8% in March from a low of 1.9% in September last year

More importantly, though, the passenger load factor declined sharply (~6ppt) pretty much across the board for all the airlines. For Indigo, at 83.5% in March, the passenger load factor was the lowest since October last year.

The Life Insurance sector is seeing strong growth. New business premium grew over 20% YoY in the March quarter, the second consecutive quarter of over 20% growth. This comes after 4 consecutive quarters of close to 0% growth. Both LIC and the Private insurers saw over 20% growth during the March quarter. LIC’s market share in new business premium has stabilised at ~57-58% for the last few quarters.

The growth in new policies sold, however, moderated to a 6-month low of 6% YoY in March 2026, with both LIC and Private insurers seeing this slowdown in growth.

The value of Gold reserves has increased by over 50% since the start of the last financial year. At the start of April 2025, the value of FX reserves held in Gold totalled just under US$80bn. As of the last week of April this year, this has increased to US$120bn. Gold holdings now account for 17% of total FX reserves, up from just under 12% a year back.

However, almost the entire increase in this is due to the higher value of gold holdings. In volume terms, RBI’s holdings of physical gold have increased by less than 1% or less than 1 metric tonne over the past year. Indeed, FY26 was the first year in recent times when the RBI did not add to its physical gold holdings. In each of the preceding 5 years, the RBI, on average, increased its gold holdings by ~45 tonnes.

The growth in wireless subscribers has continued in the last few months. After the adjustment for M2M subscribers in November, the subscriber addition has remained strong. The last 4 months have seen 7 million subscribers being added each month, with March seeing over 8 million subscribers being added – this is the highest monthly addition in over 3 years (excluding the Nov 2025 M2M adjustment).

And the increase is mostly due to Airtel and Jio, with Airtel closing the gap to Jio in the wireless subscriber market share. As of March, Airtel had 38% of the wireless subscribers while Jio had 39% of the subscribers.

And after losing subscribers in every single month for the last few years, Vi seems to have stabilised its subscriber base. In the last two months, its subscriber base increased by ~100k. This is, of course, not a lot. But remember that it had lost subscribers in each of the previous 36 months with an average monthly loss of 1.15 million.

That’s it for this week. See you next week…

• Uptick in credit growth seems for real but is it only inflation?

• FDI inflows finally turn the corner driven by higher gross inflows

• Outward remittances spike in February

• Corporate tax collections are seeing strong growth in 2HFY26

• Steel consumption is seeing strong pick up in the last few months

Bank credit growth has indeed picked up in recent months. Our apprehension that the spike in the second fortnight of March was a financial year-end artefact is most likely not the case. While we do not have bank credit data, the money supply data for the first fortnight of April suggests that the banking sector’s credit to the private sector moderated only by 1ppt to a still strong 14.6% YoY. In the last 4 fortnights, this credit growth has averaged ~14.7% YoY as against an average growth of 12.2% since October to early February. And this suggests an uptick in growth. But which growth exactly – real or nominal?

And it looks like most of this uptick might be due to higher inflation. WPI inflation, for example, has ticked up from 0.4% YoY between Oct-Jan to 3% in Feb-Mar. CPI inflation has similarly ticked up from an average of 1.3% YoY between Oct and Jan to 3.3% in Feb-Mar. So inflation has ticked up by 2ppt and so has credit growth. So it does look like there is not much of an uptick in ‘real’ credit growth; it is mostly price driving the uptick in credit growth.

After six consecutive months of outflows, net FDI flow turned positive in February this year. Feb saw a net FDI flow of US$4.6bn, as against a cumulative outflow of US$7.5bn during the preceding six months. The turnaround was driven by a sharp increase in inward FDI to US$9bn, the highest since July last year. Repatriation of existing FDI also declined to a multi-year low of US$1.7bn.

Overall, FY26 is turning out to be a strong year for FDI with YTD (till Feb) gross inward FDI already 10% above full year FY25 levels and also above the all-time gross FDI inflows of US$85bn in FY22. With even a modest growth, FY27 will see gross FDI cross US$100bn.

Outward remittances under the RBI’s LRS surged in February. On a YoY basis, they rose almost 20% to US$2.3bn. Travel continues to be the key driver of remittances, and it also saw 20% growth in February. And on a low base, outward remittances for financial investments overseas increased 50% YoY in February following a strong 70% growth in January.

A sign of improving corporate profitability is the sharp recovery in corporate tax collections in the second half of FY26. Between April and September, net corporate tax collections saw a modest 1% YoY growth. However, as of February, the growth rate has picked up to 12% YoY, implying an almost 30% YoY growth between October and February. The last 3 months (Dec-Feb) have also seen over 20% growth in collections.

Lastly, finished steel production growth moderated to a 11-month low of 7% YoY in March. However, on a full-year basis, production expanded by 10% in FY26, significantly higher than the 6% growth in FY25. Part of this is due to lower imports. Finished steel imports declined by 10% YoY in March, marking the 12th consecutive month of contraction. For FY26, imports fell sharply by 33% YoY, to multi-year lows. And consumption also is accelerating with a 9-month high growth of 15% in March following on the 13% growth in February. A sign of recovery in the construction sector?

That’s it for this week. See you next week…

• Exports and Imports see sharp decline in March driven by different sectors

• Inflation continues to edge up, driven largely by Food

• Coal production declines in March, first time in 4 mths, dispatches also remain soft

• Bank credit and deposit growth accelerate in March but uptick could be spurious

• China’s trade surplus falls sharply in March as imports surge

Exports decreased 7% YoY in March, driven by over 20% decline in Gems & Jewellery and Pharmaceuticals exports and ~15% decline in Textiles exports. Electronics goods exports also declined in March. Petroleum goods were the sole exception, with exports growing 6% YoY – mostly reflecting higher prices rather than higher volumes.

Imports also declined by almost 7% YoY. But this was driven by an over 35% decline in Petroleum imports (despite the higher prices). Excluding Petroleum, imports rose 6% YoY with Machinery and Electronic goods imports seeing ~20% YoY growth in imports. Gold is the other category that saw a sharp decline in imports.

The sharp decline in both exports and imports meant that the trade deficit declined modestly on a YoY basis and at just under US$21bn, it was the lowest since June in absolute terms.

CPI Inflation continued to tick up, rising to 3.4% YoY in March from 3.2% in February and 2.7% in January. Food inflation continues to be the key driver of this uptick having risen from 2.1% in January to 3.7% in March. So core inflation remains modest at close to 3%. More importantly, this level is broadly the same as last year and so it is not base effect which is keeping inflation low.

Oil continues to be the wild card. So far, the Oil marketing companies have absorbed the impact of higher oil prices, especially the retail fuels. But it remains unclear if and when Oil prices return to the levels they were at a couple of months back. And until that happens, there remains material upside risk to inflation. In the last monetary policy meeting, the RBI’s projections were for inflation to rise closer to 5% in the next few months. This means that any discussion around interest rate cuts is, at least for now, off the table.

Domestic coal production growth declined by 4.1% YoY in March, the first decline in the last 4 months. On the demand side while coal dispatch growth was positive, it was subdued at less than 2% YoY. Sectoral trends suggest weakness in industrial sector demand: dispatches to the sponge iron sector declined 34% YoY, marking the 11th consecutive month of contraction.

On an annual basis, sponge iron demand fell sharply in FY26. Meanwhile, dispatches to the power sector declined ~4% YoY in FY26, aligning with moderation in thermal power generation growth to ~4% in FY26, compared to a higher growth rate in the previous year, indicating relatively softer coal-based power demand.

Lastly, bank credit growth has accelerated sharply to over 16% at the end of March from just over 13% at the start of the year. Deposit growth has similarly accelerated by ~3ppt and is now running at over 13%. Both credit and deposit growth are currently at the highest rate in the last few years.

Some of this is a year-end effect, as last year the data is not exactly as of 31st March due to the change in the definition of fortnight. So once mid-April data is available, we will better know if there is a real pick up in monetary data or just a year-end artefact.

China’s merchandise exports grew just 2.5% YoY in March 2026, down from 12.2% in March 2025 and marking a five‑month low. Imports, however, surged 27.8% YoY, reversing last year’s 4.3% decline. With imports rising much faster than exports, China’s merchandise trade surplus narrowed to $ 51.13 billion.

Trade with the U.S. remained weak: exports to the U.S. fell 26.5% YoY, while imports from the U.S. rose 2.1% YoY, ending a year‑long decline. As a result, China’s bilateral goods trade surplus with the US narrowed to $16.8 billion — its lowest level since March 2025.

That’s it for this week. See you next week…

• Capital flows are a problem and not just portfolio flows

• Bank credit has seen a sharp uptick

• Incremental Credit-Deposit ratio is close to 100%

• Rupee continues to depreciate against the USD and other currencies

• Core sector growth remains sluggish with petroleum being the key drag

• US trade deficit narrows sharply in January as exports rise and imports decline

The rupee is under pressure as capital flows have turned adverse. And while we are aware of the selling by FPIs, the challenges in capital flows are much more than just FPIs. NRI deposits, for example, which used to be a steady source of inflows, turned negative in January – there were net withdrawals of US$ 600 million. For reference, the last quarter of 2025 had seen inflows average US$1.7bn, so a delta of over US$2bn in January. Outward remittances have also, not surprisingly, increased. January saw US$2.7bn outflows under the LRS, up US$500mn compared to the preceding few months.

And FDI continues to struggle. January was the sixth consecutive month of negative net FDI. January saw a negative net FDI of US$1.4bn, the highest in the last 3 months. And this is in large part because the actual equity FDI received by India in January was at a 14-month low of US$2.7bn. For reference, the preceding 3 months saw India receive an average equity FDI of US$4.5bn, almost US$2bn higher.

The only component of capital flows that has improved in recent months is the ECBs. January saw ECBs totalling US$5.3bn being approved by the RBI, the highest since March last year. Some corporates are being brave (or contrarian?) raising overseas debt with the rupee is seeing sharp depreciation!

Credit growth has accelerated sharply in recent months. As of the end of February, overall credit growth had accelerated to over 15% YoY, almost 4ppt higher since November. Deposit growth has also similarly picked up, and at 13% it has similarly increased by ~4ppt in the last few months. The credit-deposit ratio is now running over 82%, and the incremental credit-deposit ratio is now running close to 100%. While it does not appear so, the banking sector is running red hot.

The rupee continues to depreciate against the US Dollar. However, as we have highlighted before, the big picture is of the rupee’s depreciation against most major currencies, not just the USD and the sheer quantum of decline. Thus, over the past year, while the USD Index fell by ~4%, the INR Index fell by 11%. The INR has thus fallen by over 10% against most major currencies.

What is surprising is that despite this, we have not seen a material increase in inflation. And this has allowed interest rates to continue to remain low. The recent rise in oil prices will complicate this picture, but at least in the short-term, the RBI is likely to see through any increase in inflation attributable to the rise in oil and gas prices.

The Core Sector grew by 2.3% YoY in February, slowing from the 4.7% growth recorded in each of the previous two months. Out of the eight industries that comprise the core sector index, three sectors registered a decline in growth. Natural gas production contracted by 5% YoY in February, marking the 20th consecutive month of decline. Similarly, crude oil production fell for the sixth straight month. In contrast, steel production showed strong performance, recording a 7.2% YoY growth in February.

Lastly, the US goods trade deficit narrowed sharply in January, declining by US$17.7 billion to US$80.8 billion on a seasonally adjusted basis. Exports grew by 13% year-on-year in January, up from a 6.8% YoY increase in the previous month. Imports declined for the sixth consecutive month in January, with the pace of decline rising to 16% YoY. US exports to China declined for the thirteenth consecutive month. Imports from China declined for 12 straight months.

• CPI Inflation rises to over 3% in February but continues to remain modest

• Oil prices rise to US$100/bbl and are up almost 50% YoY in INR terms

• India’s energy balance has worsened in the last few years

  • Domestic oil production has declined

  • Imports of Petroleum products, and not just crude oil, have increased

• China’s exports and imports are off to a strong start in 2026

CPI Inflation rose to 3.2% YoY in February, up from 2.7% in January. This is the highest reading since April last year. However at 3.2% it remains still remains below the 4% target set for the RBI’s Monetary Policy Committee. So despite the rise, CPI remains low and comfortable. This, however, is a rear-view mirror analysis. Since then, international Oil prices have shot up due to the hostilities in the Middle East. The price of Brent crude, which averaged U$71/bbl in February, has now crossed US$100 per bbl. If they sustain at this level, and given the sharp depreciation in the rupee in the last few months, this will translate to an almost 50% increase in Oil prices on a YoY basis in INR terms.

Petroleum products directly have a ~7% weight in the new CPI basket. So a 50% increase in prices will, ipso facto, push up inflation by ~3-4ppt, pushing CPI above the upper end of the MPC’s threshold of 6%. This, of course, assumes that the international oil prices are fully passed on to the consumers. They most likely will not, at least not in the short term. To begin with, it will be the Oil companies which will absorb the higher prices, and if prices remain high for more than a few weeks, then the Government will be expected to also chip in.

But petrol, diesel and LPG are just one source of impact of higher oil prices. Almost every manufactured item that we consume has some element of petroleum. And the services required to deliver those goods require petroleum. Suffice to say that such a sharp increase in prices, compounded by the fall in the rupee, will adversely impact the price system. And what might exacerbate this, at least in the short term, is the risk of shortages, which might cause production outages, curtailing supply. But given the uncertainty over how long and severe the disruption will be, it is not possible at this point to quantify the impact on either growth or inflation with any degree of precision.

But while we are discussing energy, it is worth noting how India’s energy dynamics have changed in the last few years.

India was and remains a crude oil-deficient but refining-surplus nation. What this means is that while India is a net importer of crude oil, it is a net exporter of refined products. In calendar year 2025, for instance, while India imported 250 million tonnes of crude oil, it exported, on a net basis, 15 million tonnes of petroleum products (imported 50 million tonnes and exported 65 million tonnes).

But both of these balances have worsened over the last decade. This is because while India’s energy demand has increased, domestic production has actually declined. In 2015, India’s domestic crude oil production was 37 million tonnes or 16% of total crude oil consumption (84% was imports). In 2025, however, domestic crude oil production had declined to 28 million tonnes, down 25%, and it now covers just 10% of the domestic crude oil requirement. So 90% of the crude oil is now imported.

And our excess refining capacity has also been whittled away in the last few years. In 2015, India’s exports of petroleum products stood at 59 million tonnes. And in 2025, India’s exports of petroleum products stood at 65 million tonnes, a less than 10% increase. India primarily exports Petrol and Diesel. But imports of petroleum products almost doubled during this period – from 27 million tonnes in 2015 to 50 million tonnes in 2025. And most of these imports are LPG (~45%) and Petroleum Coke (~25%).

And a similar story has played out in natural gas. Between 2015 and 2025, while consumption of natural gas increased by 40%, domestic production increased by just 10%. Consequently, imports of LNG doubled. And more than 50% of domestic consumption of natural gas is now sourced through imports.

Bottom line, India’s energy balance or petroleum balance has worsened. And thus our vulnerability to sustained dislocation in the global energy market, which was always high, has increased in the last few years. So at this point in time, we can simply watch how things unfold. Fingers crossed…

Lastly, China’s foreign trade is off to a strong start in 2026. Merchandise exports in the first two months of the year grew by over 20% YoY while Imports grew ~20% YoY. The trade surplus consequently expanded by over 25% YoY to over US$200bn during this period.

Trade with the United States weakened, with exports down 11% YoY and imports plunging over 25% YoY, reflecting the continued impact of tariffs. By contrast, exports to the European Union grew by over 25% and those to Southeast Asian nations surged by almost 30% YoY. Imports from these regions also rose sharply. Together, the data highlights China’s deepening ties with regional and European markets and underscore China’s ability to diversify trade partnerships and reduce reliance on the US amid ongoing geopolitical tensions.

That’s it for this week, see you next week…

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In this edition of This Week In Data, we discuss:

• New series of GDP is here and GDP seems to be humming along fine

• New series lowers growth rates for last two years and also lowers the size of the GDP

• Corporate tax collections have seen sharp acceleration in recent months while income tax collections remain sluggish

• FDI inflows improve sequentially but higher outward FDI keeps total FDI at modest levels

• Services exports continue to see strong growth and trade balance at record highs

• US Trade deficit widens sharply in December as trade with China continues to shrink

So India’s economy grew by 7.8% YoY during the December quarter, down slightly from the 8.4% growth during the September quarter. For FY26, the economy is likely to grow by 7.6% YoY, higher than the 7.1% in FY25 and 7.2% in FY24. This is as per the new series of national accounts released on Friday, with FY2022-23 as the base year. Key take away, the economy seems to be humming along fine.

The new series with newer and updated data sources, as well as revised methodology, closely aligns with the changes in the economy in the last decade or so. Not surprisingly, there is a significant change to growth rates earlier reported, and the key takeaway is that, in general, growth rates for the last 2-3 years have generally been revised downwards. This implies that the older series was overestimating growth, especially in FY24. Cumulatively over the past two years (FY24-25), the real GDP growth rate has seen a downward revision by ~70bps.

The other notable feature of the new series is that it actually reduces the size of the economy slightly. The nominal GDP under the new series is ~3-4% lower than that under the old series. Given that some of the scepticism over the earlier reported GDP data was due to the perception that they were overstating growth, this downward revision should help acceptance of this series amongst the sceptics.

Corporate tax collections more than doubled in January on a YoY basis. While January is not a large month for corporate tax collections, it will be the 4th consecutive month of strong growth in corporate tax collections. Over this period (Oct-Jan), corporate tax collections increased over 35% on a YoY basis as against a modest 1% growth during the six preceding months. This increase in corporate tax collections lines up with corporate profitability data, which has shown two consecutive quarters of double-digit growth.

Personal income tax collections have not seen an uptick though. The last 4 months have seen a personal income tax collections grow by 5% YoY, broadly the same growth rate as in the preceding 6 months.

FDI Inflows continue to improve sequentially. In the first 9 months of this year (Apr-Dec), FDI flows into India increased 50% YoY to US$29bn. This was driven by a 15% increase in gross inflows while repatriation of existing FDI was largely flat. That said, outward FDI from India is also rising – YTD this has increased by almost 35% YoY. And this has meant that in absolute terms, the FDI received by India, on a net basis, was a modest US$4bn between April and December of FY26.

Services exports have continued their strong momentum in recent months. January saw services exports grow 10% YoY, down slightly from the 13% growth in December but broadly the same pace as in the recent few quarters. Imports have surprisingly seen a sharp slowdown, with January seeing services imports being largely flat on a YoY basis.

January was thus the second consecutive month of over US$20bn services trade surplus, the highest ever. The backdrop for this, of course, is the rising risk of AI disrupting India’s IT exports. So, we will be watching this data closely over the next few months.

In December 2025, the US goods trade deficit widened sharply, increasing by $15.8 billion to reach $98.5 billion, a 19% MoM rise on a seasonally adjusted basis. This is the highest level of the deficit since July 2025. This increase was driven by a 3% MoM decline in exports, while imports rose 4% MoM (seasonally adjusted basis).

U.S. exports to China declined for the twelfth consecutive month on a YoY basis. Similarly, imports from China fell for the eleventh consecutive month. China’s share of total U.S. imports dropped sharply to 7.5% in December 2025, down from 13.2% in December 2024.

For the full year 2025, the US recorded a goods trade deficit of $1.23 trillion, which was 2.1% higher than in 2024 despite the imposition of tariffs aimed at curbing imports. During the year, goods exports grew by 6% YoY while imports increased by 4.6%.

That’s it for this week. See you next week…

• New series of CPI is here and it does not change the big picture of CPI trajectory

• Wireless telecom subscribers spiked sharply in last two months due to Airtel

• Life insurance sector is seeing strong growth driven by LIC

• General insurance sector is also seeing strong growth

The long-overdue shift in the CPI base is over. On Thursday, we got the new CPI series. Inflation, as per the new series, continues to be low at below 3% in January. The big picture remains that inflation is inching up, as expected, but still remains comfortable. And so, it will not immediately change monetary policy or interest rates.

One of the key changes in the new series is the lower weight for food relative to the earlier series. Given that food is the most volatile component of the CPI, this lower weight will make the CPI series less volatile. There are, of course, several under-the-hood changes in terms of a more representative basket of commodities, a larger number of commodities, more markets from which price data is collected, and so on, which should improve its credibility.

The wireless subscriber base in India increased significantly in the last two months. November and December saw a cumulative increase of over 70 million subscribers. This is an over 6% increase in just two months. But turns out this increase was due to a technicality.

Almost the entire increase is due to Airtel, which hitherto was not reporting its M2M subscriber base (sim count) in its monthly filings. Other operators were already including their M2M sims in their subscriber base. Airtel corrected this anomaly in its December filing, due to which its subscriber base increased by almost 70 million or by 18%. Airtel did not split out how much of its subscriber base increase is due to M2M and how much organic increase, but in the 6 months before this, Airtel’s monthly subscriber growth was just over 600 thousand or ~1.2 million in two months. Not a large number.

So what are M2M sim cards? They are machine-to-machine SIM cards. SIM cards that are embedded into IoT devices, such as in modern cars, which offer internet connectivity. Or in the smart metering systems that the power distribution companies are putting in place. What is absolutely fascinating, though, is the sheer scale of this! If for Airtel, a sixth of its subscriber base is just M2M sim cards or non-human sim cards, it is fair to assume that other wireless operators have a similar number. If we just include Airtel and Jio, this implies that there are over 150 million M2M ‘active’ sim cards in the country currently. And if we include all the operators, this number rises to over 20 million. That is a very large number of sim cards embedded directly into machines.

The last few months have been good for the life insurance sector. New Business Premiums have grown by almost 30% YoY over the past 3 months, the highest growth in the last few quarters. The growth is being driven by single-premium group policies, which have seen over 40% growth. And because LIC has a much higher share of business here, it is LIC which is driving this.

But even the traditional individual non-single premium segment has seen growth tick up to almost 20% YoY over the past three months after remaining in single digits through most of 2025. And the growth is driven by higher policies – the number of individual non-single premium policies sold has grown by 28% over the past 3 months. So, things are looking good!

The general insurance sector is also seeing a pick-up in growth. Over the past three months, the total business of the general insurance companies has grown by 17% YoY, the strongest growth in over 2 years.

Among the larger companies, Bajaj, HDFC, Kotak, and SBI have seen a sharp pick up in growth. The erstwhile public sector general insurance companies continue to lose market share. Their market share has fallen from close to 50% in mid-2017 to less than 30% currently.

That’s it for this week. See you next week…

• Union Budget continues the path of, slow, fiscal consolidation

• Lower receipts drive lower capex, for both center and states

• RBI keeps interest rates unchanged

• December sees 4% decline in Airline passenger traffic driven by 11% decline for Indigo

• Power generation grows 5% in January on provisional basis

• White collar hiring sees sharp slowdown as evidenced by Naukri JobSpeak Index

First, the budget. And at a high level, it did what budgets are generally meant to do – a simple statement of accounts. And the statement of accounts presented a reasonably good picture – the fiscal deficit is expected to decline 40bps this year to 4.4% of GDP, and as per the budget estimates, it will decline by a further 10bps next year. That said it is worth noting that despite the Covid19 pandemic having long ended, the fiscal deficit continues to remain well above the pre-pandemic levels.

The interesting question, though, is how this fiscal consolidation is being achieved. In the current year (FY26), as per the revised estimates, revenues will miss budget estimates. But this has been more than offset by lower expenditure.

Total receipts for FY26 as per the revised estimates are likely to be lower than the budget estimate by ~₹900bn. In contrast, total expenditure is likely to be lower by ₹1000bn. And this entire shortfall (and some more) is due to lower grants (to states) for capital expenditure. The government had budgeted grants of ₹4,272bn as grants for capital expenditure in the budget last year. The revised estimate is almost 30% lower at ₹3,081bn. This will not have an impact on the Centre’s capital expenditure, which in any case, is independently expected to grow by less than 5% in FY26 as per the revised. But this will weigh on the state government’s capital expenditure. And the first few state budgets that have come in reflect this.

So the answer to the question of why investments in the economy don’t seem to be growing lies partly here. Of course, the budget estimates suggest that next year things will change. Capital expenditure is expected to be in double digits, and the Grants for capital expenditure will also see a sharp increase. But like this year, this will almost entirely depend on whether revenue estimates fructify. They did not this year. But some of that was due to the GST rate cuts which happened post the last year’s budget. So, unless some such external event occurs, government capex should recover next year.

Following the budget, the RBI’s Monetary Policy Committee (MPC) decided to keep its interest rates unchanged this week. So, the Repo rate remains unchanged at 5.25% while the SDF and the MSF rates remain unchanged at 5% and 5.5% respectively.

What has driven this is growing confidence in the trajectory of economic growth. The MPC raised its forecast for near-term growth by ~20bps. While inflation remains low, it is expected to pick up and rise to 4% next quarter. And the MPC notes that the external sector headwinds have increased even though the overhang of high tariffs on US exports has gone away. Accordingly, the MPC reckoned that a rate cut was not warranted.

The domestic aviation data for December was released this week. And it was a weak month, as expected, given the scheduling issues faced by the airlines, notably Indigo. Overall passenger traffic declined by 4% YoY, the sharpest decline in recent months. Indigo saw passenger traffic decline 11% YoY, again the first decline in recent months.

The other carriers benefited from this decline. Air India group saw high single-digit growth in passenger traffic while SpiceJet saw domestic passenger traffic grow for the third consecutive month. Smaller airlines saw an even sharper increase in passenger traffic – Star, for example, saw over 70% growth in passenger traffic, although admittedly this is on a low base.

Power generation grew 5% YoY in January as per provisional data. This is broadly the same growth as in December and was at the upper end of the range of the past few quarters. Renewables continue to drive this growth, with power generation from renewable sources growing over 20% in January. In contrast, power generation from conventional sources grew by a modest 2%.

Lastly, White-collar hiring moderated in January, with the Naukri JobSpeak Index growing by a modest 3% YoY after a double-digit growth in the previous month.

Hiring intentions declined sharply in telecom, financial services, and electronics, contracting by 21%, 15%, and 12%, respectively. Meanwhile, IT/software and IT hardware services reported marginal declines of 2% and 4%, respectively. In contrast, accounting, taxation & finance, advertising, and architecture remained resilient, though momentum eased from the previous month.

That’s it for this week. See you next week…

• Rupee continues to depreciate against the USD, but it has depreciated much more against other currencies

• Rupee depreciates even as the US Dollar itself is depreciating against most currencies

• Long bond yields have risen both in India and the USA

• RBI continues to intervene heavily to defend the rupee but gold price change is masking the fall in reserves

• Net FDI received by India has been negative for the third consecutive month

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We start with the Rupee, which is now headed towards 92 against the USD. And while the focus remains on the rupee’s exchange rate against the US Dollar, the real story is the rupee’s exchange rate against the other major currencies. While the rupee has depreciated ~7% against the US Dollar over the past year, it has depreciated substantially more against the other major currencies. This is because the US Dollar itself has fallen sharply against most other currencies.

Thus, against the Euro, for instance, the rupee has depreciated by almost 20% over the past year and against the British Pound, the rupee has depreciated by over 15%. Even against the Chinese Renminbi, the rupee has depreciated almost 13% over the past year.

The rupee has been an outlier against other emerging market currencies, also. Over the past year, for instance, the Brazilian Real and the Mexican Peso have appreciated by over 10% against the USD. Even the South African Rand has appreciated in double digits against the USD, while the Malaysian Ringgit has appreciated 10% against the USD over the past year.

Apart from the Rupee, the Indonesian Rupiah has been the worst-performing Asian currency, and it has fallen by just 3% against the USD. Effectively, in the global USD depreciation trade, the INR (and a couple of other currencies) have massively underperformed by depreciating against the USD. And this is odd.

The RBI continues to intervene in the forex market to support the rupee. In November, it sold ~US$10bn of reserves, and between April and November, the RBI has cumulatively sold US$43bn of reserves to defend the rupee. This is, however, not manifesting itself in a decline in the FX reserves as the gains in the value of Gold due to rising prices have almost fully offset the fall in foreign currency assets.

Not surprisingly, this sharp currency depreciation is pushing up bond yields in both India and the USA. The 10-year bond yield in the USA is now ~4.25%, the highest in the last few months. It has now increased by 25bps since October and is the highest since late August. And this is despite the 75bps rate cut from the Federal Reserve during this period. The US yield curve (10yr – 3mth), which was basically flat till September, has now steepened and is over 50bps wide.

Similarly, in India, the 10-year yield is now above 6.7%, up 25bps since late October and is now the highest in almost a year. Indeed, even short-term rates have increased in the last few weeks. The yield on the 3-month GSec has increased by almost 25bps since the start of the year and is now over 5.4%, the highest since June 2025. And this is despite the 125bps of policy rate cut in 2025.

Not surprisingly, the RBI is boosting liquidity to reduce the stress in the money markets. With the Union Budget around the corner, one suspects the bond market will settle down only post the budget, once the deficit and borrowing numbers for FY27 are available.

Lastly, one of the drags on the currency and by implication the interest rates is that while the trade deficit is contained, there is a lack of capital flows. And one of the factors here is the absence of FDI. Net FDI received by India (adjusted for repatriation as well as outward FDI by Indian corporates) was negative (meaning more money went out than came in) for the third consecutive month in November as per the provisional data from RBI released this week. Over these 3 months, India saw an outflow of FDI of almost US$4bn, taking the YTD cumulative net FDI inflow to a modest US$6bn.

For reference, India’s trade deficit (goods + services) has totaled just under US$100bn between April and December of FY26. This extremely low level of FDI relative to the trade deficit increases the vulnerability to swings in portfolio flows. And this is exactly what we are seeing currently.

That’s it for this week. It will be the budget next week(end!). So, we shall see if there is anything in the budget to change any of this. The flipside of the rupee depreciation and RBI’s FX intervention will be significantly higher realised FX gains for the RBI, which it can pay as a dividend to the Central government. Will the government use it to cut some taxes or boost spending? And will any of that turn around the sentiment? We shall find out soon! So long...

• India’s trade deficit widens over 20% YoY in December as export growth decelerates

• Exports to USA still holding up with just 2% decline in December

• Aggregate cash holdings of equity funds has gradually declined with Small cap funds seeing amongst the largest decline

• Domestic coal production sees a pick up with dispatches to non-power sectors seeing strong growth

• China’s exports continue to grow despite decline in exports to the USA

• US Inflation remains sticky complicating the task for the Fed

In case you missed, we introduced Trade DB, a separate section to track detailed trade data right down to individual 8-digit HS Code level. You can filter this by imports and exports as well as by value and quantity. In addition, you can now track detailed trade data across over 175 categories and subcategories for all key India’s trade partners (over 65 of them!). For more click here

India’s merchandise trade deficit declined 21% YoY in December to US$25bn as export growth decelerated sharply to just 2% YoY, the lowest in the last 5 months. Europe was the big drag on exports in December – the UK, Netherlands, France all saw sharp decline in exports. Exports to Singapore and Saudi Arabia also declined sharply. However, despite the tariffs, exports to the USA dropped by just 2% YoY. This decline was, however, more than offset by continued strong growth in exports to China (+67%), Hong Kong (+61%) and the UAE (+15%).

What is worth noting is that despite the tariffs kicking in from August, exports to the USA have grown by almost 10% YoY between April and December due to the front-loading of exports in anticipation of the tariffs in the first half of the year. And given the current run rate, exports to China will likely cross US$20bn for the full year FY26, making China the third largest export destination for India after the USA and the UAE, overtaking the UK and the Netherlands!

Aggregate cash holdings of domestic equity mutual funds has steadily dropped through the second half of 2025 from a high of 7% in April 2025 to ~5.5% of AUM towards the end of the year. At this level, cash holdings are the lowest since the first half of 2024, when they were around 5% of AUM.

The decline, though, is not across all fund categories. Both Large and small-cap funds have seen sharp declines in cash levels. Large-cap funds held ~3.9% of their AUM in cash, down 2ppt from April 2025 when cash holdings had totalled ~6% of AUM. Cash holdings in large-cap funds is the lowest since June 2024. And for the small-cap funds, the decline is even sharper - from almost 9% of AUM in April 2025 to just under 6% as of December. And at below 6% cash levels at small-cap funds is the second lowest in the last 2 years, the lowest being in June 2024 at 5.6%.

If the level of cash holdings reflects the optimism or otherwise of equity fund managers, then this decline in their cash holdings does suggest that fund managers, on balance, have become more optimistic about the equity market performance over the next few months. We shall see!

Domestic coal production grew 3.6% YoY in December, the strongest growth in the last 7 months. However, dispatches to end users declined 2.7% YoY. This was largely due to the decline in dispatches to power plants – thermal power plants saw their 4th consecutive month of decline in coal dispatches, with December seeing a 9% decline.

This, though, was offset partially by a sharp growth in dispatches to the Steel and Cement sectors. Dispatches to Steel mills, for instance, almost doubled on a YoY basis in December and has grown at an average of 30% over the past 3 months while those to Cement plants have increased by over 10% YoY in the last 3 months. Captive power plants have also seen double digit growth in coal dispatches over the past 3 months. Is this a marker for strong industrial growth in the ensuing months?

China recorded a monthly (goods) trade surplus of US$114bn in December 2025, the highest in the past six months, as exports rose faster than imports. Exports rose by almost 7% YoY in aggregate despite a 30% decline in exports to the USA.

China’s exports to the USA have now declined for 9 consecutive months. However, higher exports to the EU and the Southeast Asian countries offset the drag from the lower exports to the USA. China’s total imports, rose by 6% YoY in December despite a similar ~30% decline in imports from the USA.

Lastly, CPI Inflation in the USA increased by 2.7% YoY in December, which was broadly the same rate as in November. Food prices continue to be the key driver of inflation, rising to over 3% YoY in December. What is noteworthy though is that US CPI Inflation has remained above the Fed’s target of 2% in every single month since February 2021 – so almost 5 consecutive years!

As we noted last week, the US job market has seen a marked slowdown with the economy shedding jobs in the last quarter of 2025 – the first time since Covid19. Higher inflation, even as the labour market is softening, complicates the US Fed’s job as it juggles its two objectives – price stability and full employment. Not surprisingly, then, the odds of further rate cuts from the Fed have diminished. The Fed Fund Futures are now pointing to no rate cut from the Fed till April – a month ago, they were pointing towards 70% odds of at least 1 rate cut (and 25% odds of 2 rate cuts) vs current 66% odds of no rate cut.

That’s it for this week. See you next week…

• India’s GDP Growth is expected to accelerate to 7.4% in FY26

• Nominal GDP growth will however slow to multi-year low

• Why GDP growth does not matter!

• Domestic Equity funds continue to see strong inflows but folio additions has slowed down dramatically

• Debt funds have seen recovery in folios but have been overtaken by Gold funds

• US Trade deficit falls to multi year lows in October as Imports shrink

• US labour market has softened considerably in last few months

According to the First Advance Estimate (FAE), annual real GDP is projected to grow by 7.4% in FY26, up from 6.4% in FY25, and is expected to surpass ₹200 trillion in FY26, compared to a provisional estimate of ₹187 trillion in FY25. Notably, nominal GDP for FY26 is estimated to grow at just 8% YoY, the slowest growth in the last few years, implying an economy-wide inflation or the GDP deflator of less than 1%.

Real GVA is expected to grow by 7.3% YoY in FY26, higher than the 6.4% growth in FY25, so there is not much divergence between GDP and GVA growth. And internally, the growth drivers are expected to be fairly strong: the Services sector growth is expected to rise 190bps to 9.1% in FY26, while the Manufacturing sector is likely to see growth accelerate by 250bps to 7%. This will be offset by a moderation in the Agriculture sector to 3.1% (still reasonably strong) from 4.6% and in sectors like Construction and Electricity. And capex is expected to remain strong. The share of Gross Fixed Capital Formation in GDP is expected to rise further to a multi-year high of almost 34%. So much for the constant complaining about the lack of investments in the economy.

The big picture though is that the first advance estimate of GDP for FY26 is largely an irrelevant number. This is because by the time it is time for the second advance estimate of GDP to be published, at the end of February, we would migrate to the new GDP series with 2022-23 as the base year. And as is generally the case, when there is a shift of base year, there is likely to be a significant change in both the actual GDP number and its recent growth trajectory. So it is best to completely ignore this growth number and wait for the new series to start flowing in, and interpret the data and its implications.

Inflows into domestic equity funds continue to remain strong. December saw net inflows of ₹280bn, broadly the same pace as in the previous 3 months. That said, the breadth of inflows has narrowed quite significantly. The number of net new folios fell to below 1 million in December 2025, the lowest number since May 2023 and down more than 80% from the peak of almost 5.5 million net folios being added in July 2024.

Even as Equity funds have seen a massive slowdown in folio addition, debt funds have seen a pickup. In 2025, for instance, all debt funds saw the number of folios increase by over 1 million, after a cumulative decline of almost 0.8 million in the preceding 3 years. Most of this increase has happened in liquid funds, while the longer-duration funds have seen a decline.

Gold ETFs, though, have seen the strongest growth in folios in recent months. In the last 2 years, the number of folios in Gold ETFs has more than doubled, and as a category, they have more folios than all debt funds put together!

The U.S. goods trade deficit narrowed sharply in October, falling $18.6bn month-on-month to $58.6bn, and to its lowest level since 2019! This happened as imports dropped to their lowest level since June 2023, declining 5.5% YoY in October. Specifically, the consumer goods imports declined to their lowest since June 2020.

And on the other hand, exports rose to an all-time high, driven by record high exports to countries such as the UK, Switzerland and India. This data, though, pertains to October, so it is a bit dated (and running behind the normal publication schedule due to the still lingering impact of the recent Government shutdown).

Even as the trade data remains strong, the labour market data has markedly weakened. The US economy added 50,000 non-farm payroll jobs in December, a sharp slowdown compared with the 323,000 jobs added in the same month last year. Job gains for October and November were revised downward by a cumulative 76,000, with October revised to a loss of 173,000 jobs and November revised to a gain of 56,000. Effectively, the US economy has seen job losses in the last quarter of 2025, the first quarter of job losses since the pandemic. This is a significant deterioration in the US labour market. Will this change the Fed’s stance and drive a significant monetary easing in the US? The markets are not yet suggesting an imminent change.

That’s it for this week. See you next week…

• Share of Russia in crude oil imports has started to decline

• Exports to USA rose sharply in November and are broadly flat over the past 3mths

• Exports to China are rising but off a low base

• GST collections declined in December for the second consecutive month

• Wireless subscriber growth has been very strong in 2025 led by Jio and Airtel

• Demand for work under NREGA fell to decadal low in 2025 and work provided also fell to 7 year low

India’s dependence on Russian oil is reducing. In the last 3 months (Sep-Nov), the share of Russia in India’s crude oil imports stood at 32%, down from 37% in the same period last year. Over the past 12 months, 32% of India’s crude oil imports came from Russia (in value terms), down from 36% a year ago. That said, at 32% the number is still significantly above the pre-Russia-Ukraine war. Between 2019 and 2022, for instance, just 2% of India’s crude oil imports came from Russia.

Exports to the USA are also surprisingly holding firm despite the tariffs. After a decline in September and October, exports to the USA grew over 20% YoY in November, such that over the past 3 months, exports to the USA are largely flat on a YoY basis. This is only slightly worse than non-US exports, which grew by 4% during this period. This perhaps partially explains why there has been no seeming urgency on the part of the Government to quickly conclude the trade deal with the USA.

The other notable trend is the sharp surge in exports to China. Over the past 3 months, exports to China have surged over 50% YoY. In absolute terms, exports to China in the last 3 months were the highest in the last 4 years. This growth is, of course, coming off a low base – exports to China had declined 14% YoY. And despite this growth, exports to China this year (FY26) will be below the US$21 bn reached in FY21 and FY22. So this does not yet suggest a structural change in trend.

GST collections declined for the second consecutive month in December. After a 4% decline in November, collections declined by 1% YoY in December. Before the GST rate cuts, which became effective in September, GST collections were growing by 6-7% YoY. Thus, the increase in consumption post the sharp reduction in GST rates has not made up for lower rates – there has been revenue loss on a net basis. This does not mean that the GST rate cuts were a bad policy; it simply means that the Government will have to make up for this revenue shortfall through other sources of revenue or by cutting back on expenditure or simply running a higher deficit.

Wireless telecom operators are having a strong year. Between Jan-Nov 2025, they collectively added over 20 million new subscribers on a net basis, the highest since calendar year 2017, when they had added 40 million subscribers.

Jio continues to see outsized growth in subscribers. So far in 2025 (till November), Jio has added 20 million subscribers while Airtel has added just under 10 million subscribers. Vi continues to lose subscribers – so far in 2025, they have lost 7.5 million subscribers. Surprisingly, BSNL has gained subscribers this year, albeit a modest 1.2 million. This is the first time in the last several years that BSNL has gained subscribers.

Lastly, NREGA has been in focus recently. The government intends to restructure the scheme quite significantly. While there has been a fair bit of debate over the appropriateness of this, what is interesting to note is how the scheme has shrunk in recent months. The number of active workers under the scheme, for instance, has declined to 150 million as of December 2025. At its peak, the scheme had over 200 million active workers.

While the number of person days of work created declined to a 7-year low of ~2500 million. And the number of people who demanded work under NREGA declined to 272 million in 2025, the lowest since 2015!

In theory, this should be good news. For the way this scheme was originally envisaged, almost two decades back, was a pure demand-driven scheme – a counter-cyclical policy that runs on autopilot, kicking in automatically when there is a paucity of jobs (in the rural areas), as people could simply demand 100 days of work at will. So if people are demanding less work under NREGA, it would imply they are finding enough otherwise.

But clearly, the scheme did not work as a purely demand-driven scheme. It was basically a supply-side scheme, and West Bengal is a good case in point. The state has basically seen zero implementation of the scheme for the past two and a half years - for a complex set of reasons that we will not get into. So it is a good thing that the scheme is being restructured lest it go into oblivion given the way it was progressing. The question is whether the scheme in its new avatar changes anything? Time will tell…

That’s it for this week. More next week…