The private sector economy bounced back in January after losing momentum in December 2025. According to the HSBC Flash India PMI, the recovery was driven by faster growth in new orders, higher output, a return to job creation and improved business confidence across both manufacturing and services. The PMI data ahead of Union Budget 2026 is a crucial indicator for the policymakers.
Composite PMI rises to 11-month high
The HSBC Flash India Composite Output Index rose to 59.5 in January, up from 57.8 in December. The December composite PMI was 11-month low. A reading above 50 indicates expansion.
Both manufacturing and services recorded quicker increases in output, with growth rates broadly similar across the two sectors.
Manufacturing, services activity gain momentum in January
Manufacturing output strengthened in January, with the Manufacturing Output Index rising to 59.9 from 57.3 in December. The Services Business Activity Index increased to 59.3, compared with 58.0 in the previous month .
The headline Manufacturing PMI climbed to 56.8, up from 55.0 in December, indicating the best improvement in operating conditions since October 2025 .
New orders and exports pick up
Faster growth in overall new business supported the expansion in January. Survey respondents said stronger demand conditions and aggressive marketing efforts helped lift sales.
Manufacturers reported a sharper rise in new orders than service providers, although both sectors saw improvement. Export demand also strengthened, with international orders rising at the fastest pace in four months. Indian firms reported higher demand from Asia, Australia, Europe, Latin America and the Middle East .
Hiring resumes after December pause
Hiring activity resumed across India’s private sector in January after remaining unchanged in December. Although the pace of job creation was modest, it aligned with long-term trends.
Companies said recruitment focused mainly on junior- and mid-level positions, aimed at better aligning workforce capacity with business needs .
Input costs rise, firms pass on prices
Input cost inflation rose to a four-month high in January, though it remained moderate by historical standards. Cost pressures were more pronounced in the services sector, while manufacturers also reported higher spending on raw materials .
At the same time, output prices increased at the fastest pace in three months, as firms passed on higher input, labour and transportation costs to customers. Companies cited higher prices of food items such as eggs, meat and vegetables, along with fuel and steel, as key cost drivers .
Business confidence improves
Business sentiment improved to a three-month high in January, although it remained below the long-run average. Firms expressed optimism about the year ahead, supported by efficiency gains, steady demand, higher marketing spends and favourable exchange rates .
Domestic demand drives PMI rebound: HSBC
Commenting on the data, Pranjul Bhandari, Chief India Economist at HSBC, said growth gained momentum across both sectors. “Growth, as signalled by the HSBC flash PMI, picked up pace for both manufacturing and services. After losing some momentum at the end of 2025, new orders rose more rapidly – led by a faster pick up in domestic orders. Input cost pressures rose quickly, though more for goods producers than for service providers,” she said.