India's private sector has demonstrated a strong resurgence in January, according to the latest HSBC Flash Purchasing Managers' Index (PMI) data. The HSBC Flash India Composite Output Index jumped to 59.5 in January from a low of 57.8 in December, marking a significant expansion rate that surpasses the long-term series average. This rebound indicates renewed momentum across both the manufacturing and service sectors.
Both the manufacturing and service sectors experienced faster output growth, with similar rates of expansion. The Manufacturing PMI increased to 56.8 in January from 55.0 in December, signaling the best improvement in operating conditions since October. Simultaneously, the Services PMI Business Activity Index rose to 59.3 from 58.0.
The acceleration in growth was fueled by a quicker expansion in new business intakes, driven by stronger demand conditions and aggressive marketing strategies. Manufacturers recorded a more significant upturn than service providers, although both sectors saw growth pick up. International orders showed a notable increase, reaching a four-month high. Asia, Australia, Europe, Latin America, and the Middle East were identified as key destinations for Indian goods and services.
Employment within India's private sector resumed in January, following a period of no change in December. Companies reported hiring junior- and mid-level employees to better align their resources with business needs. Input prices at the composite level increased at the fastest rate in four months, although the rise remained modest by historical standards, with service sector facing more pronounced cost pressures. Output price inflation across both sectors was matched, showing the quickest increase in private sector charges in three months.
Pranjul Bhandari, Chief India Economist at HSBC, noted that the HSBC flash PMI data indicated a pick-up in growth for both manufacturing and services. However, January's manufacturing PMI remained below the 2025 average.
Looking ahead, Indian private sector companies expressed optimism regarding the 12-month outlook for business activity, with business confidence rebounding. Institutions like the International Monetary Fund (IMF) have revised India's economic growth forecast upward for the current fiscal year 2025-26, now projecting growth of 7.3%. However, projections suggest a moderation to around 6.4% to 6.6% for the next fiscal year 2026-27, due to easing cyclical factors and global economic headwinds.
