India's Business Growth Slows but Stays Strong: HSBC PMI Report

India's business growth slowed in December as HSBC PMI data showed declines in manufacturing and service sectors. Despite the slowdown, business activity remained robust with new orders rising. Companies largely kept steady staffing levels, while inflation pressures stayed muted. Business confidence softened, signaling caution about the future.

Business growth in India experienced a slight deceleration in December, as indicated by the latest HSBC PMI data released on Tuesday. The HSBC PMI Composite Index, which amalgamates outputs from India's manufacturing and service sectors, dipped to 58.9 in December from November's 59.7. Although the index saw a decline, it maintained its position well above the 50.0 threshold, signifying sustained business growth.

The December figures highlighted the least robust growth in business output since February, yet a significant expansion across the private sector continued. Both manufacturing and service sectors witnessed reduced growth in business activity in December, primarily due to a minor increase in new orders. Nonetheless, the growth in new orders remained vigorous, aided by reports of heightened customer demand.

According to HSBC, the December index showed the softest output growth since February, despite ongoing strong performance in the private sector for 2025's final month. The expansion rate moderated compared to the previous month. New orders growth also slowed at year's end but sustained a healthy level. Staffing levels saw minimal changes, indicating that businesses neither hired substantially nor enacted significant job cuts. Inflation pressures remained subdued, suggesting stable costs.

In the manufacturing sector, signs of deceleration were evident, with output and new orders witnessing weaker growth. Employment growth and stocks of purchases increased at a slower rate. Improved supply conditions led to shorter supplier delivery times. Consequently, the HSBC Flash India Manufacturing PMI decreased to 55.7 in December from 56.6 in November, marking the slowest sector improvement in two years. Despite this, the index remained above the long-term average, indicating continued solid manufacturing expansion.

Looking forward to 2026, HSBC noted that companies remain optimistic about ongoing growth, although this optimism has waned. Business sentiment declined for the third consecutive month in December, reaching its lowest point since July 2022. Overall, the HSBC PMI data suggests that despite a slight deceleration in December, India's economy persists on a growth trajectory.

(With inputs from agencies.)