India’s private sector is expected to post its sharpest expansion in over a year, with May’s HSBC Flash India Composite PMI Output Index rising to 61.2, up from 59.7 in April, according to data compiled by S&P Global.
This marks the strongest month-on-month growth since April 2024, driven largely by gains in the services sector.
Services sector leads the charge
The Services PMI Business Activity Index climbed to 61.2 in May from 58.7 in April, indicating the fastest pace of growth in 14 months.
Respondents cited strong domestic and international demand, along with technology investments and capacity expansion, as key drivers.
“India’s flash PMI indicates another month of strong economic performance,” said Pranjul Bhandari, Chief India Economist at HSBC.
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“The services sector, especially, is showing firm employment gains, highlighting healthy job creation alongside business growth.”
Manufacturing shows steady momentum
The Manufacturing PMI rose marginally to 58.3 in May from 58.2 in April, suggesting continued strength. However, manufacturing output slipped slightly to 61.4, down from 61.9 the previous month.
Despite the cooling in production, new orders and employment remained robust, maintaining the sector’s growth trajectory.
Input costs, output charges surge
Input cost inflation hit a five-month high in May, while output prices surged, especially in manufacturing, which recorded its sharpest rise in over 11 years.
These inflationary pressures were noted across both services and manufacturing, although firms continued expanding output to meet rising demand.
Business confidence rebounds
Despite ongoing geopolitical risks, including India–Pakistan tensions, business sentiment improved in May, reversing the decline seen in April.
Firms expressed renewed optimism for future sales and activity, particularly in the services segment.
Industrial production shows mixed signals
India’s Index of Industrial Production (IIP) grew by 3 per cent in March 2025, slightly better than February’s 2.9 per cent, but still lower than 5.5 per cent in March 2024, according to the Ministry of Statistics and Programme Implementation.
In Q4 FY25, IIP rose by 3.6 per cent, marking the second-lowest quarterly growth in the last two years.
Final PMI figures for May 2025 will be released in early June. IIP data for April is expected on May 28, 2025.
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Amid uncertainties in the global economy due to tariff wars and weak consumer sentiments, the Indian economy is exhibiting resilience with various high frequency indicators of industrial and services sectors sustaining their momentum in April, the monthly state of the economy report of the Reserve Bank of India (RBI) said.
The optimism on domestic growth, along with the news of a temporary freeze on tariff measures by the US, led to a significant recovery of financial markets by mid-April, the report said. It also observed the domestic equity market, which declined initially in response to the tariff announcements by the US, gained momentum in the second half of April in the wake of robust corporate earnings reports for the Jan-March period by some banking and financial sector companies.
“The global economic outlook remains clouded amidst shifting policy landscapes and lingering vulnerabilities. In the midst of these uncertainties, the outlook for India is one of cautious optimism,” the report, authored by RBI staffers, with the guidance of deputy governor Poonam Gupta, said.
It is clarified that views expressed in the report are not of the central bank’s.
Citing IMF projections of April 2025, the report noted India is projected to remain the fastest growing major economy in 2025 and is likely to surpass Japan this year to become the world’s fourth largest economy.
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It further said that the inflation pressure has eased significantly and is poised for a durable alignment with the target in 2025-26.
“The prospects of bumper rabi harvest and the outlook of an above normal monsoon would further strengthen rural consumption and is also likely to keep food inflation in check. Consumers and businesses remain confident, supportive for a strengthening of economic activity,” it said.
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The report pointed out that in the midst of global trade realignments and industrial policy shifts, India is increasingly positioned to function as a “connector country” that can become a key intermediary in sectors such as technology, digital services and pharmaceuticals.
“Going forward, notwithstanding the daunting challenges in the horizon, India stands well-positioned to navigate the ongoing global headwinds with confidence, ready to harness emerging opportunities and consolidate its role as a key driver of global growth,” it said.
Highlighting that the benign headline inflation movements were primarily driven by the substantial easing of food prices seen since last winter, the report noted that core inflation (CPI excluding food and fuel inflation) movements continued to be disproportionately impacted by the highly elevated gold prices.
“Excluding its impact, underlying inflation pressures too remained muted,” it said.
The report said that inflation pressure has eased significantly and is poised for a durable alignment with the target in 2025-26.
“Consumers and businesses remain confident, supportive for a strengthening of economic activity” it added.
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It will be quicker, cheaper and easier for British companies to trade with India as a result of the bilateral Free Trade Agreement (FTA) struck earlier this month, the UK government said on Wednesday.
Business and Trade Secretary Jonathan Reynolds described the FTA as the best deal India has ever agreed to as he convened a revamped advisory board for its first meeting, tasked with boosting exports to grow the UK economy.
The Board of Trade, made up of UK business experts, is charged with delivering targeted support for small businesses across the country and helping firms utilise the exporting opportunities from the UK's recent FTAs with the India pact followed by a US deal.
Today marks the beginning of a new chapter for British trade. This Board isn't just a talking shop it's a hands-on, dynamic force that will help businesses of every size access global markets and seize the opportunities created by our landmark trade deals, said Reynolds, who concluded the UK-India FTA negotiations during Commerce and Industry Minister Piyush Goyal's visit to London earlier this month.
We've already secured the best deal India has ever agreed to, and our US agreement has slashed tariffs for our steel and automotive sectors, protecting hundreds of thousands of British jobs, he said.
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The Department for Business and Trade (DBT) said its India trade deal is expected to be a shot in the arm for the UK's exports of whiskies and gin, cosmetics, medical devices, advanced machinery and lamb and is expected to increase bilateral trade by an estimated GBP 25.5 billion a year in the long term.
Trading with India will be quicker, cheaper, and easier thanks to improved customs processes and by promoting digital systems, which will be particularly important for SMEs (small and medium enterprises) who may have otherwise been unable to break into the Indian market, DBT said.
The UK-India FTA has been dubbed a landmark trade deal, worth GBP 4.8 billion annually to the UK economy by 2040 as a result of slashed tariffs across the board.
The UK-India Free Trade Agreement is a significant achievement that will create new opportunities for UK and Indian businesses, enable greater access to one of the world's largest and most dynamic markets, and drive growth and innovation across the UK-India corridor, said Bill Winters, Group Chief Executive of Standard Chartered and Co-Chair of the UK-India Financial Partnership.
The UK exported nearly GBP 300 million worth of food and drink to India in 2024, so this FTA represents a significant opportunity for British food and soft drinks, said Karen Betts, Chief Executive of the UK's Food and Drink Federation.
The FTA will also provide UK manufacturers with greater access to ingredients produced in India, strengthening the supply chain resilience and competitiveness for our sector, she said.
According to DBT, Wednesday's first meeting of the Board of Trade comes as part of a wider series of measures to boost the number of high-growth SMEs across the UK.
The high-profile group, made up of popular entrepreneur Mike Soutar, BT Group Chief Executive Allison Kirkby and Small Business Britain founder Michelle Ovens as ambassadors and advocates for British businesses, set about to unpick the breakthroughs with both India and the United States.
It is encouraging to see new deals struck in recent weeks and a real boost to energy and ambition. Almost all businesses in the UK are small businesses, and they have a major impact on the economy, employing millions and creating and supporting communities, said Ovens.
The board will advise on the delivery of the government's forthcoming Trade Strategy' and Small Business Strategy', to ensure both align with the economic growth agenda to raise living standards across all parts of the UK.
It also comes close on the heels of the US trade deal with President Donald Trump, which the Prime Minister Keir Starmer led government says will protect jobs in the automotive, steel, aluminium, pharmaceutical and aerospace sectors employing over 320,000 people across the UK.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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