India’s Business Growth Slows to 14-Month Low in January

India’s Business Growth Slows to 14-Month Low in January PMI

29 Jan, 2025

India’s business activity growth slowed to a 14-month low in January, raising concerns about the sustainability of its strong economic performance. The HSBC Flash India Composite PMI, compiled by S&P Global, dropped to 57.9 from 59.2 in December, marking its lowest level since November 2023. Despite this slowdown, the index remained above 50, indicating continued expansion for three-and-a-half years, the longest streak since mid-2013.

While manufacturing saw a rebound, with its PMI reaching a six-month high of 58.0 from 56.4, the services sector slumped to 56.8, its lowest in 26 months. This divergence was attributed to strong demand in manufacturing versus weaker new sales in services. Manufacturing output and new orders surged, but the services sector experienced its slowest domestic business growth in 14 months, highlighting a potential weak spot in the economy.

Despite these challenges, international demand improved, with overall exports posting their fastest growth in six months. Additionally, job creation reached a record high since the survey began in December 2005. This is positive news for India's private sector, as millions enter the workforce each year. However, high inflation remains a concern, particularly in services, where cost pressures reached their highest since August 2023, leading firms to raise prices.

With inflationary risks rising and the Indian rupee facing pressure, the Reserve Bank of India, under new Governor Sanjay Malhotra, may delay interest rate cuts at its next meeting on February 5-7. The business outlook was mixed, as manufacturing optimism surged to its highest since May 2024, while services firms became more cautious due to competition concerns. The data signals both resilience and emerging cracks in India’s economic growth at the start of 2025.