Indian Economy

Agreement (CETA) entered into force on July 15, 2026. Expanded market access and continued trade diversification are expected to support export growth and strengthen India’s participation in global value chains. Domestic financial conditions remained resilient amid renewed global financial and geopolitical uncertainties. Total bank credit increased by 17.7% year-on-year to Rs. 217.3 lakh crore as of July 15, 2026, while non-food credit grew by 17.4% to Rs. 216.1 lakh crore. Net FDI increased to US$ 6.5 billion during April-May FY27, compared with US$ 2.5 billion in the corresponding period of the previous year, reflecting continued investor interest. Foreign exchange reserves stood at US$ 666.9 billion as of June 2026, providing around 10.3 months of import cover and strengthening India’s resilience against external shocks.

Labour market conditions remained broadly resilient, although some moderation was visible in hiring momentum. High-frequency hiring indicators pointed to continued demand for skilled talent, with AI/ML hiring increasing by 25% year-on-year in June 2026. Insurance and FMCG hiring increased by 16% and 7%, respectively, while fresher hiring grew by 8%. Demand was particularly strong across media production and entertainment, healthcare and life sciences, IT and information security, production, manufacturing and engineering, and marketing and communications. India’s Net Employment Outlook for July-September 2026 stood at 48%, the highest globally, while its 13th position in the QS World Future Skills Index 2027 highlights the country’s growing readiness for an AI-enabled and technology-driven labour market.

In July 2026 Report, the following key indicators highlighted improved performances:

• Retail inflation quickened but remained within the tolerance band. Headline CPI inflation increased to 4.38% in June 2026 from 3.93% in May, while food inflation rose to 5.32%. Core inflation remained stable at around 3.9%, with inflationary pressures driven by unfavourable weather conditions affecting food prices and the transmission of elevated global fuel prices.
• Wholesale and producer-side inflation remained elevated. WPI-based inflation increased to 9.87% in June 2026 from 9.68% in May, while Output Producer Price Index (OPPI) inflation rose to 9.6% from 9.4%. Input PPI inflation also increased to 2.1% month-on-month in June, reflecting continued sensitivity of producer prices to global commodity movements.
• Agricultural conditions remained mixed amid moderation in kharif sowing. As of July 24, 2026, the area sown under kharif crops stood at 787.37 lakh hectares, 4.7% lower year-on-year, although the sowing deficit narrowed with improved monsoon conditions. Foodgrain stocks remained supportive, with cumulative KMS 2025-26 paddy procurement at 533.36 lakh tonnes and RMS 2026-27 wheat procurement at 349.92 lakh tonnes. The potential transition to El Niño remains a downside risk for rainfed agriculture.
• India’s export performance remained resilient in June 2026, with total exports of goods and services increasing by 9.5% year-on-year. Merchandise exports remained the principal driver of export growth, while the continued surplus in services trade provided an important cushion to the overall trade balance.
• Net FDI remained strong, increasing to US$ 6.5 billion during April-May FY27, compared with US$ 2.5 billion in the corresponding period of the previous year, reflecting continued investor interest in India.
• Foreign exchange reserves remained comfortable at US$ 666.9 billion as of June 2026, providing around 10.3 months of import cover and strengthening India’s capacity to absorb external shocks despite continued global uncertainties.
• Financial conditions remained supportive, with total bank credit increasing by 17.7% year-on-year to Rs. 217.3 lakh crore as of July 15, 2026, while non-food credit grew by 17.4% to Rs. 216.1 lakh crore, indicating continued availability of financing for economic activity.
• High-frequency indicators continued to signal resilient domestic economic activity during Q1 FY27. E-way bill generation grew by 12.4% year-on-year, manufacturing PMI stood at 54.6 and services PMI at 58.7, while electricity consumption increased by 8.6%. IIP growth strengthened to 5.8%, while the revised Index of Core Industries recorded 5.0% growth in June 2026.
• Domestic demand remained robust, with automobile sales registering strong growth. Domestic auto sales increased by 23.2% year-on-year during April-June 2026, with passenger vehicles, two-wheelers, commercial vehicles and tractors contributing to broad-based demand. Passenger vehicle sales reached an all-time high during the first two months of Q1 FY27.
• India strengthened its industrial and manufacturing capabilities through several strategic initiatives. The inauguration of the CG Semi OSAT facility, approval of Semicon 2.0 and the Mobile Phone Manufacturing Scheme, continued progress in critical minerals, coal gasification and shipbuilding, and the successful orbital launch by Skyroot Aerospace highlighted growing capabilities across advanced manufacturing, technology and strategic sectors.
• India continued to strengthen its trade integration and market access. The India-Oman CEPA came into force on June 1, 2026, while the India-UK CETA entered into force on July 15, 2026. India also expanded market access for agricultural and marine exports to the European Union, supporting continued export diversification.
• Foreign portfolio flows remained cautious amid global uncertainty, with preliminary trends indicating some improvement in June following the easing of geopolitical tensions. Policy measures introduced during the month, including measures to facilitate foreign capital inflows and deepen domestic debt markets, are expected to support stable foreign investment.
• The services sector received a new high-frequency indicator with the launch of the Index of Services Production (ISP) on a trial basis with base year 2024-25. Initial April 2026 data showed broad-based expansion, with 14 of 19 sub-sectors recording double-digit year-on-year growth, led by accommodation and food services, retail trade, administrative and support services, real estate and telecommunications.
• Labour-market conditions remained broadly resilient, although some moderation was visible in hiring momentum. AI/ML hiring increased by 25% year-on-year in June 2026, while insurance hiring grew by 16%, FMCG by 7% and fresher hiring by 8%. Strong hiring growth was also recorded in media production and entertainment, healthcare and life sciences, IT and information security, production, manufacturing and engineering, and marketing and communications.
• India’s future-skills outlook remained strong. The Net Employment Outlook for July-September 2026 stood at 48%, the highest globally, while India ranked 13th globally in the QS World Future Skills Index 2027, highlighting its growing readiness for an AI-enabled and technology-driven economy. The country also has more than 2,117 active GCCs, employing over 23.6 lakh professionals, with more than 2.5 lakh professionals working in AI/ML roles.

Retail inflation quickened but remained within the Reserve Bank of India’s tolerance band, with headline CPI inflation increasing to 4.38% in June 2026 from 3.93% in May, while food inflation rose to 5.32%. Core inflation remained stable at around 3.9%, indicating relatively contained underlying price pressures. The increase in inflation was driven by unfavourable weather conditions affecting food prices, particularly protein-rich items, fruits and vegetables, alongside the transmission of elevated global fuel prices. Wholesale price inflation also remained elevated, rising from 9.68% in May to 9.87% in June 2026, while Output Producer Price Index (OPPI) inflation increased to 9.6%, reflecting greater sensitivity to global commodity price movements. The recent reduction in commercial LPG and aviation turbine fuel prices, along with the withdrawal of temporary restrictions on petrol and diesel sales, is expected to provide some relief to price pressures.

Labour market conditions remained broadly resilient, although some moderation in hiring momentum was visible. The latest available monthly Periodic Labour Force Survey data for May 2026 showed a labour force participation rate of 54.4%, while the unemployment rate stood at 5.5%. High-frequency hiring indicators pointed to continued demand for skilled talent, with AI/ML hiring increasing by 25% year-on-year in June 2026. Hiring in insurance increased by 16%, while FMCG hiring grew by 7% and fresher hiring by 8%. Strong recruitment growth was also recorded in media production and entertainment, healthcare and life sciences, IT and information security, production, manufacturing and engineering, and marketing and communications.

The medium-term employment outlook remains favourable, supported by rising demand for technology-enabled skills, artificial intelligence capabilities and workforce development. India’s Net Employment Outlook stood at 48% for July-September 2026, the highest globally, while India ranked 13th globally in the QS World Future Skills Index 2027, highlighting its growing readiness for an AI-enabled economy. The expansion of Global Capability Centres and increasing demand for AI/ML talent further underline the importance of future-ready skills in supporting employment and productivity growth.