India entered 2026 with strong economic momentum, supported by solid tax collections, record digital payments and expanding factory activity. At the same time, inflation edged up to 2.75%, the trade deficit widened and unemployment rose to 5%. Retail inflation increased to 2.75% in January from 1.33% in December after the CPI base year was revised from 2012 to 2024. Wholesale price inflation also moved up to 1.81% from 1.33%. In its February 2026 policy meeting, the Reserve Bank of India kept the repo rate unchanged at 5.25%. Industrial output, measured by the Index of Industrial Production, grew 7.8% year-on-year in December 2025, driven by manufacturing, mining and electricity.
Consumption indicators showed a clear rebound. Gross GST collections rose to Rs 1.93 lakh crore in January 2026 from Rs 1.75 lakh crore in December 2025, marking a 6.2% year-on-year increase from Rs 1.82 lakh crore in January 2025. Net GST collections after refunds stood at Rs 1.71 lakh crore, up 7.6% year-on-year. Key states leading post-settlement collections were Maharashtra, Uttar Pradesh, Tamil Nadu, Karnataka and Gujarat. Business activity strengthened, with the HSBC India Manufacturing PMI rising to 55.4 from 55.0 in December. The HSBC India Services PMI increased to 58.5 from 58.0, while the HSBC India Composite PMI Output Index climbed to 59.5 from 57.8, remaining well above its long-term average of 55.0.
Digital payments maintained strong growth momentum. Unified Payments Interface processed 21.7 billion transactions worth Rs 28.33 lakh crore in January 2026. This reflected a 27.69% year-on-year rise in volumes and a 20.67% increase in value. On average, 700 million transactions worth Rs 91,402 crore were processed daily, with 691 banks live on the platform during the month.
On the external front, total exports of goods and services reached USD 80.45 billion in January 2026, up 13.17% year-on-year. Merchandise exports stood at USD 36.56 billion, while services exports were estimated at USD 43.90 billion. Imports rose faster, climbing 18.76% to USD 90.83 billion, pushing the trade deficit to USD 10.38 billion. Meanwhile, unemployment increased to 5% from 4.8% in December. The labour force participation rate slipped to 55.9% from 56.1%. Rural unemployment rose to 4.2% from 3.9%, while urban unemployment increased to 7% from 6.7%. Female labour force participation dipped to 35.1% from 35.3%.
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