India’s Economy Stays in Expansion Territory in January, But Youth Unemployment and Export Weakness Signal Uneven Recovery
High-frequency indicators show mixed but broadly stable trends, with consumption-linked signals supporting overall momentum
External demand remains uneven even as the economy holds firm in expansion zone
India’s economic momentum remained broadly stable at the start of 2026, with the latest reading of the Moneycontrol Economy Pulse coming in at 51.2 for January 2026, compared with 51.4 in December 2025.
A reading above 50 indicates economic momentum is strengthening, while a reading under 50 signals moderation.
The Moneycontrol Eco Pulse is a high-frequency composite indicator that aggregates a wide range of monthly economic and business indicators spanning consumption, industry, mobility, trade, financial activity and labour market conditions.
Growth momentum remains resilient
The January reading suggests that economic activity continues to expand despite evolving domestic and global conditions. While some moderation is visible compared with December, the index remains comfortably in expansion territory, indicating that underlying demand and activity remain supportive.
The December number was revised downwards owing to data revisions in existing indices and the addition of new indicators to track economic momentum. The Moneycontrol Eco Pulse now incorporates close to 40 indicators, with diesel consumption, unemployment rate, female labour force participation and youth unemployment as new additions. Besides, the index will also track core and food inflation categories going forward, as well as rail and air freight data, which are released with a two-month lag.
High-frequency indicators for January continue to show mixed but broadly stable trends across sectors. Consumption-linked indicators continued to support the overall momentum signal, even as external demand indicators remain uneven and infrastructure expansion slowed during the month.
For the December quarter, the high-frequency indicators suggest continued expansion in economic activity, although the pace of year-on-year GDP growth may moderate due to base effects from the corresponding quarter of the previous year. Economic momentum in October had slowed, but November and December activity seem to show a pick-up from the previous month.
Heat map: what’s lifting the index, what’s weighing on it
India’s goods and services tax collections rose 6.2 percent year-on-year in January to Rs 1.93 lakh crore, with two-wheeler and tractor sales outperforming last month’s numbers, showing rural resilience. Car sales growth, however, slowed, and so did demand for diesel. On the industrial side, while PMI data showed improvement, indicating stronger business activity conditions, diesel consumption, electricity demand and e-way bill generation, all proxies for industrial momentum, slowed during the month.
On the external side, exports expanded just 0.6 percent from the previous year, while major ports’ cargo handling also witnessed an easing.
Jobs data wasn’t encouraging either, with both urban unemployment and youth unemployment rising in January.
Momentum indicator, not GDP replacement
The Moneycontrol Eco Pulse is designed to capture changes in economic momentum rather than replicate GDP growth levels. Historically, the index has tracked turning points in India’s growth cycle, including the pandemic contraction and subsequent recovery phase.
Because it relies largely on realised economic data rather than survey responses, the index provides a complementary perspective to traditional business sentiment indicators and official GDP releases.
Early signal of economic direction
By combining multiple high-frequency indicators into a single monthly measure, the Moneycontrol Eco Pulse provides policymakers, market participants and businesses with an early signal of economic direction ahead of official quarterly GDP data.
The slower momentum in select high-frequency indicators suggests the economy is tapering from the previous quarter. The Indian economy grew 8 percent in the first half of the year, but the numbers are due for revision in the upcoming release on February 27. The government will announce fiscal third-quarter and full-year estimates for FY26 under the new GDP series with 2022-23 base, with revisions to previous years’ forecasts as well.
Moneycontrol will release the index at the end of every month to provide timely insight into India’s evolving economic landscape. Access the full index data and the methodological note at: https://www.moneycontrol.com/mc-business-index/
