India’s private sector activity gathered fresh momentum at the start of the year, with business output accelerating across manufacturing and services in January. The HSBC Flash India Composite Output Index rose to 59.5 in January from 57.8 in December, signalling a sharp pickup in overall economic activity. Any reading above the 50 mark indicates expansion, and the latest figure points to a robust and broad-based improvement in business conditions after some moderation toward the end of the previous year.
The stronger composite reading was driven by a combination of improved demand conditions and higher new order inflows. Companies across both manufacturing and services reported healthier sales, supported largely by domestic demand as consumers and businesses stepped up spending at the beginning of the year. The improvement suggests that underlying economic momentum remains intact, with firms benefiting from stable consumption patterns and increased client activity after the year-end slowdown.
Manufacturing output strengthened notably in January, reflecting better order books and a more favourable operating environment. Service sector activity also expanded at a faster pace, underlining the resilience of India’s services-driven economy. The fact that both sectors contributed to the rise in the composite index highlights the balanced nature of the current expansion, reducing concerns that growth is being driven by a narrow set of industries.
The rise in activity levels prompted companies to expand their workforce, reversing the cautious hiring stance seen in December. Businesses reported an increase in employment as they sought to align capacity with higher workloads. At the same time, firms faced an uptick in input costs, driven by higher prices for raw materials, wages and other operating expenses. While companies passed on part of these costs to customers through higher output prices, overall price pressures remained contained and broadly in line with recent trends.
Business confidence also improved in January, with firms expressing greater optimism about the year ahead. Expectations of sustained demand, improved efficiency and potential support from policy measures contributed to the more positive outlook. The survey data suggest that companies are planning further expansion and investment, particularly in areas such as marketing, capacity enhancement and technology adoption.
From a broader economic perspective, the strong January reading provides reassurance that India’s growth trajectory remains resilient despite global uncertainties and cost pressures. The acceleration in private sector activity points to continued strength in domestic demand, which remains the primary engine of growth. While external risks such as global economic slowdown and volatile commodity prices could pose challenges in the months ahead, the latest data indicate that the Indian economy entered the new year on a firm footing, with momentum likely to carry forward into the coming quarters.