India’s Economic Activity in June Shows Mixed Signals After May Slowdown: ICRA

India's economic activity in June 2025 presented a mixed picture, as noted by ICRA in its latest update. This follows a slowdown in May, when growth slipped to 6.5 per cent from 7.8 per cent in April.

Slowdown in Key Sectors

The core sector output in May rose by only 0.7 per cent, marking the weakest performance in nine months. One of the main reasons was a sharp fall in electricity production, which dropped by 5.8 per cent due to heavy rainfall. Additionally, Coal India’s output fell by 1.4 per cent after a slight gain the previous month.

Transport and mobility also lost momentum. Growth in GST e-way bills slowed to 18.9 per cent from 23.4 per cent. Domestic air travel and diesel consumption growth dropped to 4.1 per cent and 2.2 per cent, respectively. Passenger vehicle production and non-oil exports saw their growth rates cut nearly in half. Ports cargo traffic also slowed to 4.3 per cent growth from 7 per cent.

The labour market showed stress, with unemployment climbing to 5.6 per cent in May from 5.1 per cent in April. Rural areas were more affected, likely due to the end of the rabi harvest season.

Signs of Recovery in Some Areas

Despite several setbacks, some segments showed positive signs. Two-wheeler production, including scooters and motorcycles, bounced back with 4.9 per cent growth, after shrinking by 4.1 per cent earlier. Petrol usage went up by 9.2 per cent, likely because of a low base the previous year. Vehicle registrations and steel consumption also recorded moderate gains.

Experts suggest that rural demand could support two-wheeler and tractor sales, while urban areas may benefit from tax reliefs and lower loan rates. However, supply chain issues might still limit product availability.

Outlook Remains Cautious

While a few areas show improvement, the overall economic outlook remains cautious. Mixed indicators and slowing momentum in key sectors highlight the challenges India faces in maintaining stable growth during mid-2025.