India’s private sector output fell to the lowest since November 2023 at 57.9 in January, compared to 59.2 in December 2024, marking receding growth in new businesses since November 2023, according to the seasonally adjusted HSBC India PMI (Purchasing Managers’ Index) data compiled by S&P Global.

India’s service sector PMI stood at 56.8 in January, compared to 59.3 in December 2024, marking a slowdown in the service economy. The manufacturing sector showed a significant improvement at 58 in January, against 56.4 in December, marking the sector’s strongest performance since July 2024.

The data showed that a stronger expansion in the manufacturing industry was more than offset by a loss of growth momentum in the service economy. Moreover, prices of goods and services increased significantly in December due to rising cost pressures.

Sales increased at manufacturing companies and their service counterparts. “Factory orders rose at the quickest pace for six months, while the increase in services new business was the slowest since November 2023. Considering the size of India’s service economy, private sector sales growth therefore eased at the start of the year,” it adds.

Exports were one area which surged with manufacturers and service providers reporting stronger growth compared to December, due to which international sales increased quickly in six months. In terms of employment, January’s expansion in aggregate jobs was the best recorded since the data began being recorded in December 2005.

The January data highlighted an intensity in capacity pressures among private sector firms in India, as outstanding business volumes grew faster in almost two and a half years. “Service providers noted a stronger pace of accumulation than goods producers.”

Business confidence improved from December due to optimistic expectations among manufacturers, while service providers witnessed a fall to a three-month low in overall positive sentiment, due to competition concerns.

“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. 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,” says Pranjul Bhandari, chief India economist at HSBC.