India: Economic Growth Stumbles in May 2025

In a notable shift from previous months, India’s economic performance in May 2025 faced visible strain, as highlighted by Mint’s monthly macro tracker of 16 high-frequency indicators. The India Economic Performance May 2025 data showed increasing signs of a slowdown, primarily triggered by declining consumer demand across key sectors.

Out of the 16 indicators, seven turned red, a sharp rise from five in April, marking their position below the five-year average. Only six indicators remained green, signaling better-than-average performance—a drop from seven in the previous month. The remaining three indicators stayed in the amber zone, reflecting average performance. The colour-coding system (green, amber, red) is used to determine whether an indicator is outperforming, aligned with, or underperforming relative to its five-year average.

Consumer Sector of India: From Cooldown to Concern

The biggest drag came from the consumer economy, where domestic air passenger traffic and passenger vehicle sales slipped into the red zone. After staying stable in April, both indicators recorded below-par performance in May, showing consumers are either delaying discretionary travel and purchases or feeling the pinch of tighter financial conditions.

This downward shift suggests a broader trend of cooling consumption demand, a concern given that private consumption accounts for about 60% of India’s GDP. The red flags in air travel and automobile sectors indicate waning urban demand and possibly, rising costs or interest rates affecting affordability.

Producer Economy: A Mixed Bag with Worsening Signals

While the producer economy did not witness a full-blown retreat, the growing number of indicators below the five-year average paints a picture of gradual softening in industrial activity. Manufacturing growth remained patchy, with capital goods production and industrial output showing signs of stagnation.

Adding to the pressure, labour-intensive exports such as textiles and leather witnessed a significant decline. This dip not only affects export numbers but also puts pressure on employment in sectors that are major job providers. The trade balance, already flashing red, remained firmly in negative territory, suggesting persistent challenges in the external sector.

India: Bright Spot – Ease of Living Indicators Hold Ground

Despite the headwinds, the ease of living segment stood resilient. All four components—retail inflation, core inflation, rural wage growth, and labour force participation—remained in the green for May. Real rural wages saw healthy growth, boosting spending power in rural India. Meanwhile, inflation remained in check, offering some relief to households and aiding monetary policy stability.

This segment’s performance signals that while urban discretionary spending may be tapering, rural consumption is still holding firm, potentially cushioning the blow to broader economic activity.

A Turning Point or a Temporary Blip?

May’s data marks the highest number of red indicators since November 2024, signaling that the economy might be entering a phase of moderation after the robust growth seen in March. The shift from amber to red in crucial consumer categories underscores the need for careful monitoring.

Experts believe that unless consumption picks up in the coming months, especially in urban India, the India Economic Performance May 2025 could be the beginning of a broader deceleration. However, with inflation under control and rural wages on the rise, there’s still potential for recovery if demand drivers are supported through targeted policy interventions.

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