Private sector activity slows to 14-month low of 57.9 in January

Private sector activity dips in January

India’s private sector activity eased to a 14-month low of 57.9 in January from a four-month high of 59.2 in the previous month, according to preliminary results of a private sector survey released on January 24.

The HSBC India Composite PMI Flash reading, however, dipped below the 58 mark for the first time in 13 months.

"Indian private sector companies started 2025 with a slowdown in growth. With the rise in new business intakes receding, aggregate output increased at the weakest pace since November 2023," said HSBC in a press release.

Silver lining

While overall activity dipped during the month, manufacturing performance was better as factory output rose to a six month high of 58 from 56.4 in the previous month.

Manufacturing was one of the laggards in the second quarter, pulling down growth to a seven-quarter low of 5.4 percent.

"India’s manufacturing sector started the year strong, with output and new orders bouncing back from a relatively weak third fiscal quarter. The rise in new export orders was especially noticeable and the easing of input cost inflation is also good
news for manufacturers," said Pranjul Bhandari, chief India economist, HSBC.

On the other hand, services growth disappointed as new business growth in services slowed.

"The cooling in growth in new domestic business in the services sector, however, highlights a potentially emerging weak spot in the economy. New export business for service providers, on the other hand, looks set to maintain its growing momentum,” said Bhandari.

Annual numbers released by the government earlier this month pegged FY25 estimated growth at 6.4 percent, lower than the estimate of 6.5-7 percent and revised RBI estimate of 6.6 percent.

The uptick in manufacturing activity also provided a boost to business confidence, with sentiment at the highest since May 2024. Services sentiment, on the other hand, declined to a three month low.

Employment in manufacturing also received a fillip, helped by brighter outlook and lower cost escalation.

"In the manufacturing industry, the rate of inflation retreated to a ten-month low and was modest by historical standards," HSBC noted, whereas services recorded a faster pace of cost escalation.

Both manufacturing and services firms, however, exhibited pricing power with selling prices rising at a faster rate than December.

Annual numbers released by the government earlier this month pegged FY25 estimated growth at 6.4 percent, lower than the government’s estimate of 6.5-7 percent and revised RBI estimate of 6.6 percent.

Indian economy would need to grow 6.8 percent in the second half to ensure that growth doesn’t slip below 6.4 percent. It grew 6 percent in the first half of the year.