Domestic Macroeconomic Highlights, December 2025: Manufacturing activity slows down in November

Inflation: India’s consumer price inflation rate fell to a record low of 0.25% in October 2025, down sharply from the revised 1.44% in September and below the consensus of 0.48%. This marks the ninth consecutive month below the RBI’s 4% target and the third consecutive month below the 2% lower tolerance band. The decline was driven by food prices, which fell a record 5.02% annually. Inflation also moderated for housing (2.96%), and fuel and light held at 1.98%. Indian consumer prices rose 0.15% from the previous month.

India’s Manufacturing Slows, Services Ease in November PMI: The HSBC India Manufacturing PMI fell to 57.4 in November 2025 from 59.2 in October, signaling the slowest improvement in factory activity since February. This slowdown was characterized by factory output rising at the softest pace since May, with new orders expanding modestly (slower than in October) and employment rising at its weakest rate in over a year and a half. The HSBC India Services PMI rose to 59.5 in November 2025 (preliminary estimates), increasing from October’s five-month low of 58.9, though it was slightly below the market forecast of 59.7. The sector saw a faster expansion supported by stronger output growth and a tick higher in new orders. However, foreign demand experienced a mild loss of momentum, and the pace of job creation eased compared with the previous month.

 India’s Q2 GDP Growth Surges to 8.2%: India’s Gross Domestic Product (GDP) quickened to 8.2% in the second quarter (Q2 FY26), marking a six-quarter high and sharply higher than the 5.6% growth in Q2FY25, exceeding the 7% RBI projection. This strong performance, following 7.8% growth in the April–June quarter, was led by the manufacturing sector, which grew 9.1% (vs 2.2% last year). Real GDP has registered 8.0% growth rate in H1 (April-September) of FY 2025-26, as compared to the growth rate of 6.1% in H1 of FY 2024-25.

Fiscal Deficit Reaches Half-Year Target: India’s fiscal deficit for the first seven months of the fiscal year (April–October) 2025-26 stood at ₹8.25 lakh crore. This figure represents 52.6% of the full-year Budget Estimate (BE) for FY26, which is higher than the 46.5% recorded in the corresponding April-October period of the previous fiscal year, FY 2024-25. The total expenditure reached ₹26.25 lakh crore (51.8% of BE), with capital expenditure (Capex) rising significantly to ₹6.17 lakh crore, a strong increase from ₹4.7 lakh crore YoY, indicating continued government focus on infrastructure.

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Source: HDFC Tru (www.hdfc-tru.com) Email: tru@hdfcsec.com Phone: 9930203944