HSBC Flash India PMI: 2025 Begins With Private Sector Growth Slowing, Services Lose Steam

Indian private sector companies started 2025 with a slowdown in growth, data from the HSBC Flash India PMI suggested. With the rise in new business intakes receding, aggregate output increased at the weakest pace since November 2023. A stronger expansion in the manufacturing industry was more-than-offset by a loss of growth momentum in the service economy.

Falling from a final reading of 59.2 in December to 57.9 in January, the HSBC Flash India Composite Output Index—a seasonally adjusted index that measures the month-on-month change in the combined output of India's manufacturing and service sectors—indicated the weakest rate of expansion for 14 months. Still, the headline figure was comfortably above its long-run average of 54.7.

In contrast to the slowdown seen at the composite level, which was driven by the service economy, there was a pick-up in growth at goods producers. The HSBC Flash India Manufacturing PMI increased from 56.4 in December to 58.0 in January, highlighting the best improvement in the health of the sector since July 2024.

Sales expanded at manufacturing companies and their services counterparts, though the direction of growth differed. Factory orders rose at the quickest pace for six months, while the increase in services' new business was the slowest since November 2023. Considering the size of India's service economy, private sector sales growth, therefore, eased at the start of the year.

Exports saw broad based growth, with both manufacturers and service providers indicating stronger increases than in December. Similarly, job creation strengthened across the two tracked sub-sectors. January's expansion in aggregate employment was the best registered since comparable data became available in December 2005. Survey members suggested that permanent and temporary workers had been hired on both part- and full-time bases.

Cost pressures escalated at the composite level, though trends varied at the granular level. In the manufacturing industry, the rate of inflation retreated to a 10-month low and was modest by historical standards. Conversely, the expenses of service providers increased to the greatest degree in just under a year-and-a-half. Survey participants reported greater chemical, labour, leather, meat, rubber and vegetable costs.

As for selling prices, rates of inflation were broadly similar at goods producers and service providers. Across the private sector, output charges increased at a marked rate that was quicker than in December and above its long-run average.

Business confidence improved from December, reflecting more buoyant forecasts among manufacturing companies, who were at their most optimistic since May 2024. Meanwhile, the overall level of positive sentiment at service providers slipped to a three-month low, owing to concerns around competition.