India's Economic Activity Shows Mixed Signals in June After May Slowdown: ICRA
New Delhi: Economic activities for the month of June showed mixed signs, after experiencing a notable slowdown in May 2025, according to a recent report by ICRA.
Although electricity demand showed signs of improvement in June, daily average vehicle registrations continued to deteriorate compared to the previous month.
Additionally, rural sentiments are expected to bolster demand for two-wheelers and tractors, and urban demand may benefit from income tax cuts and lower borrowing costs, although product availability remains a challenge.
Last month, India's economic activity decelerated to 6.5 per cent year-on-year (YoY) growth, down from 7.8 per cent in April 2025. This moderation was largely influenced by worsening performance across 10 of the 15 constituent indicators.
The core sector output, recorded a sluggish 0.7 per cent growth in May 2025, marking a nine-month low. This decline was primarily driven by four of the eight core sectors, with electricity generation experiencing a sharp 5.8 per cent contraction due to excess rainfall during the month.
Further dampening the economic outlook, the all-India unemployment rate saw an uptick, rising to 5.6 per cent in May 2025 from 5.1 per cent in April 2025, according to the monthly Period Labour Force Survey (PLFS). This increase was particularly sharp in rural areas, likely influenced by the seasonal conclusion of the rabi harvesting period. However, a comprehensive analysis of the labour market remains challenging due to the unavailability of year-ago data.
Several key indicators contributed to the overall deceleration. Electricity generation saw a significant YoY contraction of -8.6 per cent in May 2025, a widening from -1.9 per cent in April 2025. Coal India Limited's (CIL) output also reverted to a contractionary zone at -1.4 per cent from a positive 0.5 per cent. Transport and mobility-related indicators such as GST e-way bill generation (+18.9 per cent from +23.4 per cent), domestic air passenger traffic (+4.1 per cent from +8.5 per cent), and diesel consumption (+2.2 per cent from +4.3 per cent) all showed moderation in their YoY performance. Additionally, passenger vehicle (PV) production growth halved to +5.4 per cent from +10.8 per cent, and non-oil exports also saw their growth cut in half to +5.1 per cent from +10.3 per cent. The latter also impacted ports cargo traffic, which slowed to +4.3 per cent from +7.0 per cent.
In contrast to these declines, a few indicators showed resilience. Two-wheeler production (including scooters and motorcycles) saw an improvement, rising to +4.9 per cent from -4.1 per cent. Petrol consumption also increased to +9.2 per cent from +5.0 per cent, largely attributed to a low base effect.
Vehicle registrations improved to +5.4 per cent from +3.8 per cent, and finished steel consumption also saw better growth at +7.8 per cent compared to +6.0 per cent in April 2025.
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