New Delhi: India’s private sector began 2025 on a slower
growth trajectory as the service sector's momentum softened, while
manufacturing demonstrated strong gains, according to the latest HSBC Flash PMI
survey. The overall growth in output for January slowed to its lowest rate
since November 2023.
The HSBC Flash India Composite Output Index, which
tracks combined output from manufacturing and services, declined from 59.2 in
December to 57.9 in January, signaling the slowest expansion in 14 months.
Manufacturing Surges While Services Slow
India’s manufacturing sector performed exceptionally well,
with the HSBC Flash India Manufacturing PMI rising to 58.0 in January
from 56.4 in December, marking its best performance since July 2024. Key
improvements were noted in new orders, production, employment, and supplier
delivery times. The Manufacturing PMI Output Index also increased to 60.3, up from
59.
In contrast, the HSBC Flash India Services PMI Business
Activity Index fell from 59.3 in December to 56.8 in January, highlighting
a deceleration in service sector growth.
“India’s manufacturing sector started the year on a strong
note, supported by robust export orders and easing input cost inflation,” said
Pranjul Bhandari, Chief India Economist at HSBC. “However, the slowdown in
domestic demand for services points to a potential weak spot in the economy.”
Mixed Business Sentiment
While manufacturers showed the highest optimism since May
2024, sentiment in the service sector dipped to a three-month low, driven by
concerns over rising competition. Businesses also faced significant cost
pressures in January, with prices for goods and services increasing sharply.
Manufacturers increased input purchases, leading to higher
pre-production inventory levels, while stocks of finished goods dropped to
their lowest level in nearly three years.
Economic Outlook
India aims to achieve a $10 trillion economy within the next
decade, with a focus on expanding the manufacturing sector in areas like
semiconductors, electric vehicles, renewable energy, and defence. The
government has ramped up capital expenditure to support this vision,
prioritizing infrastructure development, job creation, and manufacturing
growth.
As the manufacturing sector continues to gain momentum,
addressing weaknesses in the services sector will be key to sustaining overall
economic growth.