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* Preliminary estimates indicate that India's economic activity remained resilient in May'26, with EAI-GVA growth at 7.7% YoY (vs. 7.8% in Apr'26), supported by continued strength in the services sector (9.1% YoY) and resilient industrial activity. Manufacturing and construction remained robust, while electricity generation accelerated further, offsetting the continued contraction in mining. Agricultural activity moderated amid weaker reservoir levels and softer rural indicators following the delayed onset of the monsoon. Consequently, non-farm EAI-GVA remained strong and grew 8.5% YoY in May’26 underscoring the resilience of the broader non-agricultural economy.

* EAI-GDP growth moderated to 5.5% YoY in May'26 from 10.8% in Apr'26, reflecting slower consumption growth and a negative contribution from net exports as imports outpaced exports. EAI consumption growth eased to 6.9% YoY in May’26 from 10.7% in Apr’26 amid softer auto sales, government revenue spending, and rural wage growth, although services activity and personal credit remained supportive. In contrast, EAI investment improved to 7.3% YoY in May’26 from 6.6% in Apr, aided by robust industrial credit, stronger electricity generation, capital goods production, and infrastructure-related activity.

* High-frequency indicators for Jun'26 present a mixed picture. On the positive side, registered vehicle sales and CV sales strengthened considerably, while PV sales remained robust despite moderating from the previous month, pointing to continued resilience in domestic demand. However, both manufacturing and services PMIs eased, and reservoir levels deteriorated sharply, indicating some moderation in underlying growth momentum. Overall, EAI-GVA averaged a healthy 7.8% YoY during Apr-May'26, suggesting that economic activity has remained resilient at the start of FY27.

* The southwest monsoon remains the key determinant of India's near-term growth and inflation outlook. June rainfall ended 39.8% below the long-period average (LPA)—the fifth-driest June since 1901. Although rainfall activity improved during the first week of July, narrowing the cumulative rainfall deficit to around 27% below the LPA, the delayed onset initially slowed kharif sowing and reduced reservoir storage. Total kharif acreage, which was running 22.7% below last year's level in late June, improved sharply following the recent revival in rainfall, with the deficit narrowing to around 5.3% YoY by the first week of July. Nevertheless, the spatial and temporal distribution of rainfall over the remainder of the monsoon season will remain critical for agricultural output, rural income, and food inflation.

* Based on the Apr-May activity data and the latest high-frequency indicators for June, we continue to estimate 1QFY27 real GDP growth at around 6.5% YoY, broadly in line with the RBI's forecast of 6.6%, supported by resilient services activity and investment momentum. Although the ceasefire in West Asia announced in mid-June should gradually reduce external headwinds, the normalization of shipping routes, supply chains, and commodity markets is expected to take time, implying that June activity will continue to reflect some lagged impact of the earlier disruptions. Going forward, weather-related developments remain the principal downside risk to the growth and inflation outlook.

* EAI-GVA grew 7.7% in May’26: Preliminary estimates indicate that India's economic activity remained resilient in May'26, with EAI-GVA growth at 7.7% YoY (vs. 7.8% in Apr'26), supported by continued strength in the services sector (9.1% YoY) and resilient industrial activities. Manufacturing and construction remained robust, while electricity generation accelerated further, offsetting the continued contraction in mining. Agricultural activity moderated amid weaker reservoir levels and softer rural indicators following the delayed onset of the monsoon. Consequently, non-farm EAI-GVA remained strong and grew 8.5% YoY in May’26, underscoring the resilience of the broader non-agricultural economy (Exhibits 1 and 2).

* EAI-GDP moderated to 5.5% YoY in May’26: EAI-GDP growth moderated to 5.5% YoY in May'26 from 10.8% in Apr'26, reflecting slower consumption growth and a negative contribution from net exports as imports outpaced exports. EAI consumption growth eased to 6.9% YoY from 10.7%, amid softer auto sales, government revenue spending, and rural wage growth, although services activity and personal credit remained supportive. In contrast, EAI investment strengthened to 7.3% YoY in May’26 from 6.6% in Apr’26, supported by robust industrial credit, stronger electricity generation, capital goods production, and infrastructure-related activity (Exhibits 3 and 4).

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