Weekly Economic Outlook: December 29, 2025 - January 05, 2026
- Remin Francis I R
- Jan 5
- 2 min read
Last week, the major economic updates came from India, with fresh data on industrial production, manufacturing activity, and foreign exchange reserves offering useful insights into the current state of the economy. India’s latest economic data offers a mix of encouragement and caution. On the one hand, industrial activity picked up sharply in November. On the other hand, forward-looking indicators suggest that momentum may be easing as businesses deal with global uncertainty and competitive pressures.
Industrial production in India grew 6.7% year-on-year in November 2025, a sharp acceleration from the upwardly revised 0.5% growth in October. This marks the fastest pace of expansion since October 2023 and helps ease fears that aggressive tariff hikes by the US could lead to a prolonged slowdown in India.
Manufacturing was the clear driver. Output in the manufacturing sector rose 8%, up from 2% in October, supported by higher production of basic and fabricated metal products, pharmaceuticals, and motor vehicles. Mining activity also rebounded strongly, growing 5.4% compared to a contraction of -1.8% in the previous month, helped by the end of the monsoon season.
One weak spot remained electricity generation, which fell for a second straight month, declining 1.5% after a sharper 6.9% drop in October.
While hard data looks strong, survey-based indicators are turning more cautious. The HSBC India Manufacturing PMI slipped to 55.0 in December 2025, down from 56.6 in November and below the initial estimate of 55.7. This reading marks the weakest improvement in two years.
Factory output grew at its slowest pace since October 2022, and new orders softened. Export demand also cooled, rising at the weakest rate in 14 months, with orders mainly coming from Asia, Europe, and the Middle East. Employment increased only marginally, suggesting firms feel adequately staffed as workloads ease.
Encouragingly, input cost inflation remained subdued, and output price inflation eased to a nine-month low. However, business confidence fell to its lowest level in nearly three-and-a-half years, as companies pointed to competitive pressures and market uncertainty.
On the external front, India’s foreign exchange reserves rose to USD 696,610 million as of December 26, up from USD 693,320 million the previous week. Over the long term, reserves have averaged USD 311,804 million since 1998, peaking at USD 704,890 million in September 2024. This strong reserve position continues to provide a solid buffer against global volatility.
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