India's business activity during the month of January 2025 witnessed its slowest growth rate in over a year, the HSBC flash India Composite Purchasing Managers' Index (PMI), conducted by S&P Global, showed on January 24. The new data highlights potential vulnerabilities in the country's remarkable economic performance as it enters 2025, despite firms ramping up staff hiring at an unprecedented rate.
The services sector, which is a key driver of the Indian economy, is showing signs that may threaten the sustainability of robust economic growth, particularly with government forecasts indicating a deceleration to 6.4% overall growth for the current fiscal year.
The PMI reading dropped to 57.9 in January, marking its lowest level since November 2023, down from December's final figure of 59.2. Nonetheless, ..
While the manufacturing sector showed resilience, with the PMI rising to a six-month high of 58.0 from 56.4 in December, this was countered by a notable decline in the services index, which fell to 56.8 in January—the lowest reading in 26 months—down from 59.3.
Pranjul Bhandari, HSBC's chief economist for India, told news agency Reuters, "India's manufacturing sector kicked off the year with strength, as output and new orders recovered from a relatively sluggish third fiscal quarter." She ..
Despite these challenges, there were encouraging signs. Overall international demand improved significantly, with exports recording the fastest growth in six months. Job creation across sectors reached unprecedented levels since the survey began in December 2005, which is promising for the private sector as millions enter the workforce each year in the world's most populous nation. Nonetheless, ensuring the availability of quality jobs remains a challenge for Prime Minister Narendra Modi.
Inflationary pressures, however, have intensified. While cost inflation in manufacturing eased, it surged in the services sector, reaching the highest level since August 2023. Service firms have increased their prices at a faster rate, indicating that they are passing rising costs onto clients.
High inflation risks, especially in light of a weakening currency, may influence the Reserve Bank of India's rate-setting panel, led by new Governor Sanjay Malhotra, not to initiate monetary policy easing when it convenes next from February 5-7.
Looking ahead, the business outlook for the upcoming year presents a mixed picture. Manufacturing companies are experiencing their most optimistic forecasts since May 2024, while sentiment among services firms has dropped to a three-month low, lik ..
Source Name : Economic Times