Business activity cools to 10-month low in December

Business activity growth eases further

Business activity in India cooled to a 10-month low in December, as growth in both manufacturing and services moderated, though overall expansion remained firmly in positive territory.

The HSBC Flash India Composite PMI slipped to 58.9 in December from 59.7 in November.

“The HSBC Flash India PMI ended 2025 in positive fashion, completing a year of marked growth for the private sector,” said Andrew Harker, economics director at S&P Global Market Intelligence.

“Rates of expansion in output and new orders eased in December but remained sharp nonetheless. Firms were helped by inflationary pressures remaining muted as the year drew to a close.”

Manufacturing, services both soften

The slowdown was broad-based. Manufacturing output growth weakened, with the PMI easing to 55.7 from 56.6, marking the slowest improvement in nearly two years.

Services activity also lost momentum, with the business activity index slipping to 59.1 from 59.8. Despite the moderation, both sectors remained above the 50 mark, signalling continued expansion.

Exports strengthen, inflation stays benign

One bright spot was external demand. New export orders rose to a three-month high, with firms citing stronger demand from the US, the UK, Germany and parts of Asia and the Middle East.

Inflation dynamics continued to ease pressure on businesses. Input costs rose only modestly in December, increasing at a pace below the long-term average. Output price inflation also remained subdued, registering its second-slowest rate in nine months.

Hiring cautious, confidence weakens

Employment indicators pointed to caution. Firms reported that existing staff levels were largely sufficient to meet current workloads, signalling limited near-term hiring appetite.

Business confidence, while still positive, softened further and fell to its lowest level since mid-2022, with sentiment particularly weak in the services sector.

The December PMI data suggests the private sector is entering the new year with growth intact but momentum slowing, as firms balance steady demand and benign inflation against softer confidence and cautious hiring plans.