India's Service Growth Slows, Manufacturing Gains

New Delhi: With a loss of growth momentum in the service economy, India's private sector growth moderated in January to the lowest level in more than a year as the services sector in the composite purchasing managers’ index or PMI fell to 56.8 in January from 59.3 in December last year, while the expected reading was 59.6. Nonetheless, a score above 50.0 indicates expansion in both manufacturing and services sectors, a private survey showed on Friday.

As per the survey conducted by HSBC Flash India, the composite PMI output index recorded at 57.9 in January from 59.2 in December last year. It, however, pointed out that though the private sector companies in India started 2025 with a slowdown in growth in services PMI, the manufacturing index rose to a 6-month high of 58.0 in January from 56.4 in the previous month with the rise in new export orders, expanded sales and the easing of input cost inflation across the sector, which is also good news for manufacturers in the country.

Commenting on the survey, Pranjul Bhandari, chief India economist at HSBC, said that 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,” Bhandari said.

In the January data, the survey showed an intensification of capacity pressures among private sector companies in India. Besides, service providers noted a stronger pace of accumulation than goods producers. “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, the economist said.

In the employment front, the survey also pointed out that job creation strengthened across the two tracked sub-sectors. “The January’s expansion in aggregate employment was the best since comparable data became available in December 2005. Survey members suggested that permanent and temporary workers had been hired on both part- and full-time bases,” the survey showed.

Cost pressures, the survey said, escalated at the composite level, though trends varied at the granular level. “In the manufacturing industry, the rate of inflation retreated to a ten-month low and was modest by historical standards. Conversely, the expenses of service providers increased to the greatest degree in just under a year-and-a-half. Survey participants reported greater chemical, labour, leather, meat, rubber and vegetable costs,” it added.