Private sector growth recovers from December low: HSBC Flash PMI

After losing some momentum at the end of calendar year 2025, growth across India's private sector economy bounced back in January, with early survey data indicating a quicker upturn for manufacturers than for service providers.

According to HSBC’s Flash India Purchasing Managers’ Index (PMI), released on Friday, there were quicker increases in new orders and output, alongside the reinstatement of job creation and a rebound in business confidence in January.

The flash survey, an advance estimate ahead of final PMI readings, offers an early indication of shifts in economic sentiment and output.

The HSBC Flash India Composite PMI Output Index, compiled by S&P Global, is expected to rise to 59.5 in January from an 11-month low of 57.8 in December, signalling an uptick in overall private sector growth. The reading remains comfortably above the 50-point threshold that separates expansion from contraction.

The manufacturing sector has showed continued growth, with the HSBC Flash India Manufacturing Output Index forecast to rise to 59.9 in January from 57.3 in December, signalling improved momentum in factory production.

The services sector has also showed continued strength. The Flash Services Business Activity Index is projected to rise to 59.3 in January from 58 in December, reflecting steady demand and healthy business confidence.

The broader HSBC Flash India Manufacturing PMI is expected to rise from 55.0 in December to 56.8 in January, which would mark the best improvement in operating conditions since last October.

The final PMI data for January will be released in early February.

Weak input-cost growth

“Input costs rose at the weakest rate in nearly five-and-a-half years, while output charge inflation eased to an eight-month low,” the survey said. On the positive side, the survey noted that aggregate rates of input cost and output charge inflation remained moderate despite quickening since December, indicating stability in growth.

“Input prices at the composite level rose at the quickest pace in four months during January, albeit one that was modest by historical standards. Underlying data showed that cost pressures were more pronounced in the service economy,” it said.

“Underpinning the acceleration in growth of private sector activity was a faster expansion in overall new business intakes. According to survey members, sales were fuelled by strengthening demand conditions and aggressive marketing campaigns. Manufacturers noted a quicker upturn than service providers, though growth picked up pace in both cases,” the survey said.

The flash PMI data is based on responses from around 400 manufacturers and 400 service providers.

The January data showed a marked upturn in aggregate international orders – the greatest in four months. Asia, Australia, Europe, Latin America and the Middle East featured in the qualitative part of the survey as the main destinations for Indian goods and services in the latest month, the survey said.

Hiring resumes

Hiring across India's private sector resumed in January, after no change in employment during December. Although slight, the pace of job creation was broadly aligned with the series trend. Anecdotal evidence indicated that recruitment stemmed from efforts to better align resources with business requirements. Companies mentioned adding junior- and mid-level workers to their teams, it added.

Pranjul Bhandari, chief India economist at HSBC, said, “Growth, as signalled by the HSBC flash PMI, picked up pace for both manufacturing and services. Despite the rise in the manufacturing PMI, January’s figure remained below the 2025 average. After losing some momentum at the end of 2025, new orders rose more rapidly – led by a faster pick up in domestic orders. Input cost pressures rose quickly, though more for goods producers than for service providers.”

When assessing the 12-month outlook for business activity, Indian private sector companies were optimistic, the survey said. The overall level of positive sentiment remained below its long-run average, but rose to a three-month high. Efficiency gains and demand buoyancy boded well for growth, panellists said. Allocated marketing budgets and favourable exchange rates were also identified as tailwinds, the survey noted.

Softer nominal GDP growth

Earlier this month, the statistics ministry estimated that India’s economy was likely to grow 7.4% in the current financial year, aided by strong growth in manufacturing and services output, healthy household spending and strong investments in fixed assets.

This is above the 6.3-6.8% growth the government forecast for this fiscal in the Economic Survey 2024-25. While GDP in real terms exceeded expectations, growth in nominal terms lags behind the 10.1% projected in the union budget for this fiscal year. The first advance estimate released this month projected 8% nominal growth, the softest since the pandemic slump of 2021.

Softer nominal GDP growth is projected in the context of consumer price index (CPI)-based inflation remaining below RBI’s target of 4%, aided by a fall in food prices. Retail price inflation was at 1.3% in December. The RBI last month projected CPI-based inflation at 2% for the current financial year.

With inputs from Gireesh Chandra Prasad.