India’s private sector expanded at its fastest pace in six months in February, driven by a surge in services activity, but underlying imbalances raise concerns about the sustainability of growth.
HSBC’s flash PMI data signalled robust aggregate demand, prompting firms to increase hiring. However, while cost inflation eased, firms raised prices at a faster pace, indicating persistent margin pressures.
The HSBC Flash India Composite Output Index rose to 60.6 in February from 57.7 in January, marking the strongest expansion since August 2024.
Growth was overwhelmingly led by the services sector, which posted its fastest rise in nearly a year, while manufacturing activity lagged.
The divergence raises questions about the resilience of industrial output, especially amid increasing competitive pressures.
The HSBC Flash India Manufacturing PMI slipped to 57.1 from 57.7 in January, reflecting a slowdown in new factory orders.
While the index remained well above its long-term average of 54.1, the loss of momentum suggests that manufacturing’s contribution to growth may be weakening.
Competitive pressures weighed on firms, limiting their pricing power even as input costs moderated.
In contrast, service providers saw the steepest rise in new business since August 2024, reinforcing the notion that growth is being driven by consumer-facing industries rather than industrial expansion.
Export demand provided some relief, with new international orders increasing at the fastest rate in seven months.
Goods producers led the upturn, though their growth momentum slightly weakened. The strength in external markets contributed to rising order backlogs, which increased at the sharpest rate in over four years.