India’s economic momentum strengthens as MCEP rises to 57.3 in June

MUMBAI: India’s economic engine appears to have shifted up a gear, ending the June quarter with more than just momentum, it gathered pace. A broad-based improvement across consumption, manufacturing, exports and infrastructure pushed the Moneycontrol Eco Pulse (MCEP) to 57.3 in June, up from 54.3 in May, signalling that economic activity accelerated well above its long-term trend.

The MCEP, a proprietary index tracking 38 high-frequency indicators across consumption, manufacturing, labour markets, trade and financial activity, uses 50 as the dividing line between expansion and contraction. June’s reading marked its strongest performance in three months, pointing to a stronger finish to the first quarter of FY27.

Consumer demand remained the economy’s biggest growth driver, with vehicle sales gathering pace across almost every segment. Passenger vehicle sales rose 35 per cent year-on-year in June, up from 33.5 per cent in May, while tractor sales surged to 34.3 per cent from 19.5 per cent, indicating improving rural demand.

The recovery was equally visible in mass-market mobility. Two-wheeler sales accelerated to 26.3 per cent from 11.9 per cent, while three-wheeler registrations climbed to 55.2 per cent from 36.7 per cent, reflecting stronger commercial activity and last-mile transport demand.

Digital spending also remained resilient. Credit card spending growth improved to 3.6 per cent from 2.8 per cent, while UPI transactions expanded 23.5 per cent, marginally lower than 24.2 per cent in May but still comfortably above historical averages. Non-food bank credit growth also strengthened to 18.3 per cent from 17.4 per cent, signalling sustained lending activity.

Meanwhile, demand for work under MGNREGA contracted 17.4 per cent, compared with 27.6 per cent in May, suggesting rural labour market conditions remained relatively stable despite the onset of the monsoon.

Industrial activity also strengthened, even as survey-based indicators softened slightly. The HSBC Manufacturing PMI eased to 54.2 from 55.0, but remained firmly in expansion territory.

Hard economic indicators painted a stronger picture. Electricity demand rose 11.6 per cent, slightly higher than 11.2 per cent in May, while e-way bill generation accelerated to 14.5 per cent from 10.9 per cent, indicating faster movement of goods. Core sector output improved to 5 per cent from 3.2 per cent, and major port cargo traffic expanded 9.4 per cent, up from 6.6 per cent a month earlier.

External trade emerged as another bright spot. Merchandise exports jumped 31 per cent year-on-year after growing 20.6 per cent in May, reflecting resilient overseas demand despite ongoing geopolitical uncertainty. Imports also increased 10.7 per cent, up from 9.7 per cent, pointing to firm domestic demand.

The services sector, however, cooled modestly. The Services PMI slipped to 57.4 from 59.8, while the Composite PMI eased to 57.1 from 59.3, although both indices remained comfortably above the expansion threshold.

Fuel consumption presented a mixed picture. Petrol demand accelerated to 7.4 per cent from 3.4 per cent, while diesel consumption climbed to 6.2 per cent from 1.6 per cent, signalling stronger passenger and freight movement. In contrast, aviation turbine fuel demand slowed to 0.1 per cent from 0.9 per cent.

The stronger June reading has improved expectations for Q1 FY27 GDP growth, suggesting economic activity gathered pace steadily through the quarter after a relatively softer start.

Even so, some pressure points remain. Wholesale inflation accelerated to 10.7 per cent in June from 9.7 per cent in May, while urban unemployment edged up to 6.6 per cent, highlighting that the recovery continues to be uneven across sectors.

Taken together, the latest MCEP reading suggests India’s growth story ended the quarter on firmer footing, with consumption, trade and infrastructure doing much of the heavy lifting. Whether that momentum can be sustained through the rest of FY27 may now depend on how inflation, employment and global demand evolve in the months ahead.