Indian Economy

Petroleum products, electronics and engineering goods accounted for 93.6% of the incremental growth in merchandise exports, while growth in non-energy and non-precious imports reflected firm domestic demand. India also advanced trade integration through its engagement under BRICS, including initiatives to strengthen MSME participation in international markets, resilient global value chains and export diversification.

Domestic financial conditions remained resilient amid 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$ 7.8 billion during April-June FY27, compared with US$ 4.8 billion in the corresponding period of the previous year. Foreign exchange reserves stood at US$ 716.9 billion as of August 14, 2026, providing around 10.5 months of import cover and covering about 94% of external debt, thereby providing a strong buffer against external shocks. The current account deficit widened to US$ 3.1 billion in Q1 FY27, but resilient services exports, recovering capital flows and comfortable reserves continued to support external-sector stability.

Labour market conditions remained broadly resilient, with monthly indicators pointing to improving participation and lower unemployment. The Labour Force Participation Rate (LFPR) increased to 55.4% in July 2026, compared with 54.9% in July 2025, while the unemployment rate declined to 5.1% from 5.2%. High-frequency hiring indicators also strengthened, with white-collar hiring increasing by 5% year-on-year, IT hiring by 6%, AI/ML hiring by 33%, and fresher hiring by 6% in July 2026. Non-IT hiring was led by insurance (10%), real estate (8%) and healthcare (6%). Employer demand is increasingly shifting towards AI literacy, problem-solving, adaptability and practical job-readiness, with 75% of surveyed employers intending to hire freshers in H2 CY2026. India’s early-career technology talent recorded a score of 62 in the NASSCOM AI-Native Talent Index, placing it in the AI-proficient category, while more than 90% of the cohort was classified as either AI-native or AI-proficient.

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

• Retail inflation remained within the tolerance band, while wholesale inflation moderated. Headline CPI inflation increased marginally to 4.45% in July 2026 from 4.38% in June, while food inflation rose to 5.52%. Core inflation remained stable at around 3.9%. WPI-based inflation moderated to 9.78% in July from 9.87% in June, while Output Producer Price Index (OPPI) inflation remained unchanged at 9.6%. Fuel-related inflation moderated, although food and other supply-sensitive components continued to exert price pressures.
• Agricultural conditions remained mixed amid below normal kharif sowing and rainfall. As of August 21, 2026, total kharif sowing stood at 1,056.7 lakh hectares, around 1.5% lower year-on-year, with the decline concentrated in paddy, maize and soybean, while pulses recorded a marginal increase. Rainfall during June 1-August 2 was 13% below the long-period average, although reservoir levels were around 97% of the 10-year average. Foodgrain procurement remained supportive, with cumulative KMS 2025-26 paddy procurement at 570.88 lakh tonnes and RMS 2026-27 wheat procurement at 357.57 lakh tonnes. The emergence of El Niño remains a downside risk for agricultural output and food inflation.
• India’s export performance remained resilient in July 2026, with merchandise exports increasing by 19.6% year-on-year to US$ 44.2 billion. Services exports increased by 6.4% to US$ 35.9 billion, while higher merchandise imports of US$ 76.2 billion widened the merchandise trade deficit. The services surplus of US$ 17.0 billion offset around 53% of the merchandise trade deficit. Petroleum products, electronics and engineering goods accounted for 93.6% of the incremental growth in merchandise exports, while employment-intensive export categories recorded declines.
• Net FDI remained strong, increasing to US$ 7.8 billion during April-June FY27, compared with US$ 4.8 billion in the corresponding period of the previous year, reflecting continued investor interest in India.
• Foreign exchange reserves remained comfortable at US$ 716.9 billion as of August 14, 2026, providing around 10.5 months of import cover and covering about 94% of external debt, thereby strengthening India’s capacity to absorb external shocks amid global financial and geopolitical 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, although the pace of expansion moderated in July 2026. Manufacturing PMI stood at 53.5 and services PMI at 53.3, while electricity consumption increased by 10.6%. IIP growth strengthened to 7.3% in June 2026, while the revised Index of Core Industries recorded 5.4% growth in July 2026. E-way bill generation remained at its second-highest monthly level, supporting the continued strength of goods movement.
• Domestic demand remained robust, with automobile sales recording strong growth. Urban and rural automobile sales increased by 23.8% and 27.9%, respectively, in July 2026, indicating broad-based demand across rural and urban markets. Air passenger traffic moderated in June amid higher costs and operational disruptions, while port cargo traffic remained strong.
• India continued to strengthen its industrial and technological capabilities through strategic initiatives and indigenous innovation. The launch of support schemes by IN-SPACe, development of the 800 kN FFSC liquid oxygen-methane EVEREST rocket engine by Astrobase Space Technologies, delivery of an indigenous 350-kg thrust-class turbojet engine by DRDO-GTRE and Azad Engineering, and development of a domestically built 1.5-tesla MRI scanner by VoxelGrids highlighted growing capabilities across space, defence, healthcare and advanced manufacturing.
• India strengthened its industrial competitiveness and global market positioning. The NITI Aayog-CRISIL Intelligence assessment of 62 sectors identified 12 sectors with potential for global leadership, while highlighting the need to address critical-input dependence, fragmented supply chains, infrastructure and logistics gaps, limited domestic value addition, technology constraints and skill shortages.
• India continued to strengthen trade integration and market access through multilateral and bilateral engagement. Under its BRICS Presidency, India advanced initiatives to strengthen intra-BRICS trade, MSME participation in international markets and resilient global value chains. The initiatives include the Jaipur Consensus and Credit Assessment Frameworks for export MSMEs, the Internationalisation of MSMEs Workplan, the GVC Action Plan 2026-30 and principles for digitally delivered services, supporting export diversification and wider global market access.
• The services sector continued to show resilience, with services PMI remaining expansionary at 53.3 in July 2026, while port cargo traffic increased by 8.8% year-on-year. Domestic air cargo traffic also remained strong in June, increasing by 9.4%. The launch of the Index of Services Production (ISP) is expected to strengthen high-frequency monitoring of services activity.
• Labour-market conditions remained resilient, with improving monthly participation and hiring indicators. The Labour Force Participation Rate increased to 55.4% in July 2026 from 54.9% in July 2025, while the unemployment rate declined to 5.1% from 5.2%. White-collar hiring increased by 5% year-on-year, with IT hiring rising by 6%, AI/ML hiring by 33% and fresher hiring by 6%. Non-IT hiring was led by insurance (+10%), real estate (+8%) and healthcare (+6%).
• India’s future-skills outlook remained strong, with employer demand increasingly focused on AI literacy, practical capabilities and job readiness. 75% of employers surveyed by TeamLease intended to hire freshers during July-December 2026, while India’s early-career technology talent recorded a 62 score in the NASSCOM AI-Native Talent Index, placing it in the AI-proficient category. More than 90% of the cohort was classified as either AI-native or AI-proficient. The evolving labour market highlights the growing importance of AI orchestration, technical expertise, problem-solving, adaptability, apprenticeships and practical exposure.

Retail inflation remained within the Reserve Bank of India’s tolerance band, although headline CPI inflation increased marginally to 4.45% in July 2026 from 4.38% in June, while food inflation rose to 5.52%. Core inflation remained stable at around 3.9%, indicating relatively contained underlying price pressures. The increase in food inflation was driven by higher prices of protein-rich items, processed food products, cereals and edible oils, while vegetable price pressures softened. Wholesale price inflation moderated to 9.78% in July from 9.87% in June 2026, while Output Producer Price Index (OPPI) inflation remained unchanged at 9.6%. Fuel-related inflation also moderated, although elevated global commodity prices continued to pose risks to domestic producer and consumer prices. The reduction in commercial LPG prices by around Rs. 200 per 19-kg cylinder from August 1, following a reduction of Rs. 183 in July, is expected to provide some relief to supply-side price pressures.

Labour market conditions remained broadly resilient, supported by higher labour force participation and continued demand for skilled talent. The latest monthly Periodic Labour Force Survey data for July 2026 showed a labour force participation rate of 55.4%, compared with 54.9% in July 2025, while the unemployment rate declined to 5.1% from 5.2%. High-frequency hiring indicators pointed to continued demand for technology-enabled and specialised talent, with overall white-collar hiring increasing by 5% year-on-year in July 2026. AI/ML hiring increased by 33%, while IT hiring grew by 6% and fresher hiring by 6%. Among non-IT sectors, hiring increased by 10% in insurance, 8% in real estate, 6% in healthcare, and 5% each in BPO/ITeS and FMCG.

The medium-term employment outlook remained favourable, supported by rising demand for artificial intelligence capabilities, practical skills and workforce development. 75% of employers surveyed by TeamLease intended to hire freshers during July-December 2026, compared with 73% during the first half of the year, with particularly strong hiring intent in e-commerce and technology start-ups, retail, and manufacturing. India’s AI-Native Talent Index score stood at 62, placing its early-career technology talent in the AI-proficient category, with more than 90% classified as AI-native or AI-proficient. The evolving employment landscape increasingly emphasises AI and digital literacy, problem-solving, adaptability, communication and practical workplace capabilities, highlighting the importance of future-ready skills in supporting employment and productivity growth.