Indian private sector companies began 2025 with a notable slowdown in growth as new business intakes decelerated. Aggregate output increased at its weakest pace since November 2023, according to the latest HSBC ‘flash’ PMI data compiled by S&P Global. While the manufacturing sector showed robust expansion, the service economy lost momentum, pulling down overall growth.

The HSBC Flash India Composite Output Index, a seasonally adjusted measure of combined output from the manufacturing and service sectors, fell from December’s 59.2 to 57.9 in January, marking the slowest rate of expansion in 14 months. However, this figure remained comfortably above its long-term average of 54.7.

Manufacturing showed resilience, with the HSBC Flash India Manufacturing PMI rising from 56.4 in December to 58 in January, its best performance since July 2024. Factory orders increased at their fastest pace in six months, while new business growth in the service sector slowed to its weakest since November 2023. Given the size of India's service economy, this deceleration weighed heavily on private sector sales growth.

Export growth, however, provided a bright spot, with both manufacturers and service providers reporting stronger international sales. January saw the fastest expansion in aggregate global sales in six months, with gains reported across the Americas, Asia and Europe.

Employment also surged, with January marking the strongest growth in aggregate employment since comparable data collection began in December 2005. Companies across manufacturing and services hired both permanent and temporary workers to meet demand.

Capacity pressures intensified, with outstanding business volumes rising at their quickest rate in nearly two and a half years. Service providers reported a faster build-up in backlogs compared to goods producers.

Cost pressures varied across sectors. Manufacturing input inflation eased to a ten-month low, while service providers faced the steepest cost increases in nearly 18 months, driven by higher prices for chemicals, labour, leather, meat, rubber and vegetables.

Selling price inflation was strong across the private sector, with output charges rising faster than in December and exceeding long-term averages. Business confidence improved in the manufacturing sector, reaching its highest level since May 2024, though optimism among service providers dipped to a three-month low amid concerns over competition.

In the manufacturing sector, input purchases rose sharply, supporting an increase in pre-production inventories as suppliers’ delivery times improved. However, finished goods stocks fell at their sharpest rate in nearly three years.