India's economy is ending 2024 on a positive note, with private sector growth hitting a four-month high, according to the latest survey data. The strong performance in both services and manufacturing, combined with record job creation, has provided a solid foundation for future economic prospects.
The country's economy grew at a slower rate of 5.4% in the previous quarter, but there is optimism as inflation continues to ease, potentially boosting demand in the private sector. The outlook for 2025 is looking stronger, with businesses expected to benefit from the improved inflationary environment.
The December flash India Composite Purchasing Managers' Index (PMI), released by HSBC and compiled by S&P Global, rose to 60.7, matching August’s level. This is a significant recovery from November’s 58.6 reading, and marks a period of consistent growth as the business activity index has stayed above 60 for all but three months this year. Such sustained strength hasn’t been observed since the global financial crisis of 2008, indicating robust expansion in the private sector.
Experts noted that the slight increase in the manufacturing PMI for December was driven by gains in current production, new orders, and employment. Particularly, the growth in domestic orders accelerated, signaling a recovery in economic momentum.
The services sector showed an even stronger performance, with the PMI rising to a four-month high of 60.8, up from 58.4 in November. Meanwhile, the manufacturing PMI also improved, rising to 57.4 from 56.5. Service providers led the way in sales, with the new business sub-index reaching its highest level since January. Additionally, increasing international demand for both goods and services contributed to the surge in sales, with goods seeing faster growth than services.
This optimism has bolstered the business outlook for 2025, with overall confidence reaching its highest point since September of the previous year. As a result, companies have ramped up hiring at the fastest pace since the survey began in 2005, with both manufacturing and services sectors hitting new records in job creation.
In terms of inflation, pressures eased in December following two months of significant price rises. However, businesses continued to raise their selling prices, albeit at a slower pace than the near 12-year high seen in November. This trend is expected to provide some relief to the newly appointed Reserve Bank of India Governor, Sanjay Malhotra. Consumer inflation for November was recorded at 5.48%, lower than anticipated, which has fueled expectations that the central bank may reduce rates in February 2025, according to a Reuters poll.