India’s private sector output expanded at the fastest rate in six months in February, driven by strong growth in the services sector, according to HSBC Flash PMI data released on Friday. The HSBC Flash India Composite Output Index rose to 60.6 in February, up from 57.7 in January. This marks the quickest rise in private sector activity since August 2024, significantly above the long-term average.
The services sector saw a sharper increase in business activity than manufacturing, recording its strongest growth in nearly a year. Meanwhile, the manufacturing sector faced a slight slowdown. The HSBC Flash India Manufacturing PMI fell to 57.1 in February from 57.7 in January, though it remained above its historical average of 54.1. While factory orders continued to grow, the pace of expansion softened due to competitive pressures. In contrast, service providers experienced their steepest rise in new business since August 2024, leading to an overall acceleration in private sector growth.
The hiring trend also reflected this momentum. Services companies added employees at a faster rate than manufacturers, with the overall job creation rate reaching a record high. Businesses recruited both full-time and part-time workers, including a notable intake of trainees.
On the cost front, companies reported rising expenses due to higher input, labour, and transportation costs. However, the overall rate of inflation remained moderate and hit a four-month low. Cost pressures were more pronounced in the services sector, which also faced increased spending on food. In response to rising costs, both goods and services firms raised their prices at a quicker pace in February. The overall rate of charge inflation was the fastest in three months and above the long-term average.
Looking ahead, Indian private sector businesses remain highly optimistic about future growth. Confidence levels in February were slightly higher than in January, reaching their strongest level since November 2024. Notably, manufacturers were particularly upbeat about future output.
Business confidence in the economy is measured through preliminary surveys, which help create key indexes. These figures provide an early snapshot but may be updated when the final Purchasing Managers’ Index (PMI) data is published next month. A PMI reading above 50 signals economic expansion, while anything below that suggests a slowdown.
To boost demand and accelerate growth, the government recently introduced record-breaking tax cuts worth 1 trillion rupees in the latest federal budget. This move comes as the country braces for its slowest economic growth since the pandemic, with the current fiscal year set to end in March.
In a further effort to support the economy, the central bank has also lowered interest rates for the first time in nearly five years.
The strong performance in February indicates a resilient private sector, with services driving expansion and businesses maintaining a positive outlook despite cost pressures and competitive challenges.
