2025 ends on a mixed note: Consumption holds firm, manufacturing momentum softens

On a daily basis, Indians made nearly 698 million UPI transactions in December.

• Consumer demand stayed strong in 2025, with GST and UPI hitting record highs
• Manufacturing slowed, with PMI at its weakest pace in two years
• Export growth softened, leading to cautious business sentiment for 2026

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India’s economy closed 2025 with a clear divergence between consumption and production trends. High-frequency indicators such as GST collections, UPI transactions and automobile sales pointed to resilient consumer demand, even as manufacturing activity slowed to its weakest pace in two years, weighed down by softer export growth and easing business optimism.

Consumption indicators strengthened toward the end of the year. Gross GST collections rose to Rs 1.74 lakh crore in December, up 6.1 percent year-on-year and higher than Rs 1.70 lakh crore in November. December marked the fastest pace of GST growth in three months, following the GST rate rationalisation implemented in September.

“While the strong growth seen in the first six months of FY26 seems to have tapered after the rate cuts, gross collection growth of 6.1 percent month-on-month indicates consumption has been on the upswing, with volume growth offsetting lower rates,” said MS Mani, Partner at Deloitte India.

Digital payments offered an even clearer signal of consumption spending and formalisation of low-ticket transactions. December turned into a record-setting month for the Unified Payments Interface (UPI), with transaction volumes touching an all-time high of 21.6 billion, surpassing November’s 20.47 billion. Transaction value climbed to Rs 28 lakh crore, exceeding both November’s Rs 26.3 lakh crore and the previous peak of Rs 27.3 lakh crore recorded in October.

On a daily basis, Indians made nearly 698 million UPI transactions in December.

Automobile sales added to the consumption narrative. Passenger vehicle demand remained firm in December, supported by lower GST rates and festive-season spillovers. Domestic passenger vehicle sales to wholesale dealers rose sharply year-on-year.

Maruti Suzuki recorded a 37 percent jump, while Mahindra’s passenger vehicle segment recorded a 23 percent rise.

It’s commercial segment saw a 13 percent jump in LCV category and 31 percent jump in three-wheelers. Tractor maker Escorts Kubota reported domestic despatches jump of 38 percent.

In contrast, production-side indicators softened toward year-end. The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) fell to 55.0 in December from 56.6 in November, marking the slowest expansion in manufacturing activity in 24 months. While the index remained comfortably above the 50-mark that separates expansion from contraction, the moderation pointed to easing momentum.

Export demand was a key drag. New export orders rose at their slowest pace in 14 months, reflecting both weaker global demand and a narrowing of destination markets. Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, noted that the share of firms reporting higher export sales in December was roughly half the average seen during 2025.

Industrial signals were mixed even within core sectors. Coal India reported a 4.6 percent year-on-year increase in production in December, but offtake declined 5.2 percent, hinting at softer near-term industrial demand.

Looking ahead, manufacturers remain cautiously optimistic. Output expectations for 2026 are still positive, but overall business sentiment has fallen to its lowest level in nearly three-and-a-half years.