India’s private sector output hits six-month high in Feb

India’s private sector output reached a six-month high in February, fueled by a sharp expansion in services activity, according to the latest HSBC Flash PMI data. The seasonally adjusted HSBC Flash India Composite Output Index increased to 60.6 from 57.7 in January, marking its strongest expansion since August 2024 and staying above its long-term average. The services sector played a key role in this growth, with the HSBC Flash India Services PMI Business Activity Index jumping to 61.1 from 56.5 in January, reaching its highest level in nearly a year. Meanwhile, manufacturing sector growth softened slightly, as the HSBC Flash India Manufacturing PMI slipped to 57.1 from 57.7 in January, though it continued to reflect strong expansion.

India’s private sector output recorded its fastest growth in six months during February, powered by a sharp expansion in services activity. The HSBC Flash India Composite Output Index rose to 60.6 from 57.7 in January, significantly exceeding its long-term average. Service providers experienced a stronger increase in activity compared to manufacturers, marking the highest growth since August 2024. The robust business expansion is an encouraging sign for India’s economy, which navigates global uncertainties including potential tariffs from United States President Donald Trump that could escalate into a wider trade war.

According to the latest HSBC Flash data, aggregate sales saw robust growth, putting pressure on operating capacities and prompting companies to ramp up hiring. However, the HSBC Flash India Manufacturing PMI declined slightly from 57.7 in January to 57.1 in February, as most sub-components retreated. Despite the dip, the index remained well above its long-run average of 54.1, indicating continued strength in the sector. While factory orders rose sharply, the pace of growth softened compared to the previous month.

In contrast, service providers recorded the sharpest rise in new business intakes since August 2024, pushing composite-level growth to a six-month high. The HSBC Flash India Services PMI Business Activity Index surged to 61.1 (up from 56.5 in January), its highest level in nearly a year.

Additionally, India’s private sector saw a rise in international demand for its goods and services, with new export orders growing at the fastest rate in seven months, reflecting gains from global markets.

Pranjul Bhandari, Chief India Economist at HSBC, said, “Rapid restocking around the world continues to lift new export orders. A healthy acceleration in orders and output is keeping firms optimistic about the future. Input prices eased while output prices rose at a faster pace, leading to improved margins, especially for goods producers.”

Favorable demand conditions exerted further pressure on operating capacities, leading to a significant rise in outstanding business volumes. The rate of backlog accumulation reached its highest level in over four years, with service firms experiencing a more pronounced impact than manufacturers. 

In response to mounting backlogs, service companies expanded their workforce at a faster pace than goods producers. At the composite level, job creation hit a new record, with firms hiring both permanent and temporary workers across full- and part-time roles. 

Rising labour and transportation costs kept input prices elevated, though inflationary pressures remained moderate by historical standards. Service firms faced increased expenses on food and wages, further intensifying their cost burdens. The HSBC Flash PMI data highlighted contrasting price trends, with input cost inflation easing to a four-month low, while selling prices rose at a faster rate, especially in the services sector.

February’s flash data highlights a faster increase in prices charged for Indian goods and services. The overall rate of charge inflation was the highest in three months and remained above its long-term average.

The study noted, Private sector firms exhibiting strong optimism about future output, with business sentiment reaching its highest level since November 2024. The business confidence was particularly strong in the manufacturing sector, where companies increased raw material stockpiles to sustain production growth.