India's June economic data mixed as demand cools, industrial output surges

India’s economic performance in June presented a mixed picture, with moderating consumer demand and rising inflation offset by strong industrial output and export growth. Industrial production expanded at its fastest pace in nearly two years, recording 7.3% year-on-year growth.

Consumer demand showed signs of cooling, with spending on cars, tractors, and air travel losing momentum. Passenger car and van sales growth slowed to 15.3% in June from 26.3% in May, while tractor sales rose 11.9%, down from 19.6% the previous month. Inflation remained above the Reserve Bank of India’s (RBI) 4% target, contributing to the uneven economic expansion.

Despite softer consumption, production activity remained resilient. Core-sector growth improved to 5%, led by infrastructure-related industries, and labour-intensive exports returned to double-digit growth. The RBI kept the repo rate unchanged at 5.25% for the fourth consecutive review in August, signaling a data-dependent approach to future policy decisions.

Indian banks mobilized approximately $28 billion in net fresh foreign currency non-resident (FCNR) deposits between June 5 and July 30, reflecting efforts to bolster foreign exchange inflows.