Series 110 – India’s private sector growth accelerates in May, led by services: HSBC Flash PMI

India’s private sector is gaining impressive momentum as it kicks off FY26 with broad-based growth across services and manufacturing. The HSBC Flash Composite PMI Output Index surged to 61.2 in May 2025, from 59.7 in April. This acceleration reflects stronger business activity, buoyed by robust domestic demand and export orders, especially in the services sector which saw the fastest rise in output in 14 months. The sharp pickup also comes with renewed business confidence showing India’s private enterprises are responding to a fertile demand environment with greater agility.

Manufacturing and Services Drive Steady Expansion:
Order books were supported by strengthening international demand for Indian goods and services, with the private sector registering the fastest rate of increase in exports in a year. Growth in non-domestic sales in the service economy accelerated to the quickest pace in 11 months, more than offsetting a slowdown in the manufacturing industry. While manufacturing activity slightly cooled in May, it continued to exhibit robust momentum — the HSBC India Manufacturing PMI edged up to 58.3 in May from 58.2 in April, maintaining a ten-month high streak. The services sector, however, was the standout performer. The HSBC Flash India Services PMI Business Activity Index surged to 61.2 in May from 58.7 in April, reflecting vigorous expansion. This strong services performance was underpinned by technology investments, capacity enhancements, and steady job creation. Notably, April’s surge in new export orders hinted at a broader shift in global production patterns in India’s favor, potentially catalyzed by shifting trade dynamics and recent U.S. tariff measures.

Rising Costs Met with Higher Prices Amid Strong Demand:

Amid this growth, price dynamics have shifted notably. Input costs in May rose at the fastest pace since late 2024, driven by higher labor, fuel, and raw material expenses. However, businesses — particularly in manufacturing — responded by increasing their output prices at the steepest rate in over 11 years, preserving margins. This pricing power is not typically possible unless underlying demand is strong, suggesting the current inflation is demand-led, not just cost-push. Companies across sectors reported improved ability to pass on costs to consumers, which, while contributing to near-term inflation, also indicates healthy business fundamentals.

Positive Outlook for India’s Economy Despite Global Challenges:

Looking ahead, Indian companies express optimism supported by strong client pipelines, stable demand, and improving productivity. Despite global uncertainties and regional tensions, India’s private sector continues to exhibit resilience and adaptability. The synchronized growth in services and manufacturing, rising employment, and robust exports signal that India is firmly on a growth trajectory — and this momentum is a positive backdrop for India’s economic outlook and domestic markets.

Keep following us for more contents like these. As always, we keep re-emphasising our SIP mode of investment. You can connect with your relationship manager to know more about our SIP Program.

These weekly episodes are now available in our website for your quick read and you may access the same in the below link.

Weekly Enlightenment Archives – ITUS Capital