India’s private sector activity continued to expand sharply in December 2025, even as the pace of growth moderated to a ten-month low, according to the latest HSBC Flash PMI data.
Softer momentum across manufacturing and services reflected easing new order inflows and subdued business confidence, though overall output remained firmly in expansion territory.
Composite Output Remains Strong Despite Slower Pace
The HSBC Flash India Composite Output Index stood at 58.9 in December, down from 59.7 in November, but well above the 50.0 threshold that separates expansion from contraction. The reading marked the softest growth in combined manufacturing and services output since February, indicating moderation rather than a reversal in activity.
Both sectors recorded slower output growth, mirroring a deceleration in new business, though demand conditions remained broadly supportive.
New Orders Ease, Export Demand Picks Up
Growth in total new orders slowed towards the end of the year but remained strong, supported by improving customer demand. Notably, export orders gained momentum, with the rate of growth accelerating to a three-month high in December.
Survey respondents reported fresh overseas demand from markets including Australia, Bangladesh, Canada, Germany, the Middle East, Sri Lanka, the UK and the US, helping offset the softer domestic order trend.
Manufacturing PMI Slips to Two-Year Low, Still Firm
In manufacturing, output and new orders expanded at a slower pace in December, accompanied by softer increases in employment and purchase stocks. Suppliers’ delivery times shortened more sharply, contributing to the overall moderation.
The HSBC Flash India Manufacturing PMI declined to 55.7 from 56.6 in November, marking the weakest improvement in manufacturing sector health in two years. Despite the slowdown, the reading remained well above the long-term average, signalling continued expansion.
The Manufacturing Output Index eased to 58.4 from 59.6 in November, underscoring resilient production levels even as growth cooled.
Employment Growth Plateaus as Capacity Holds
Companies across both manufacturing and services largely maintained existing workforce levels, with anecdotal evidence suggesting staffing was sufficient to manage incoming orders. Employment rose marginally overall, marking the slowest increase since February 2024.
Manufacturing firms reported slight additions to payrolls, while services employment remained broadly unchanged. Backlogs of work were stable for a third consecutive month, indicating that firms were keeping workloads under control.
Inflation Pressures Remain Muted
Input cost inflation stayed modest in December, rising only slightly faster than November’s near five-and-a-half-year low. Price pressures were below the series average across both manufacturing and services.
Output prices also increased modestly, registering the second-slowest rise in nine months. While services charges edged higher than in November, manufacturing selling price inflation eased for a second straight month and was the weakest since March.
Business Confidence Softens Further
Looking ahead to 2026, companies remained optimistic about sustaining growth, but sentiment weakened for the third consecutive month, slipping to its lowest level since July 2022.
The decline in confidence was led by the services sector, while manufacturing optimism improved slightly from the previous month. Firms cited expectations of steady new business inflows, supported by product quality and marketing efforts, even as slower growth towards year-end tempered overall optimism.
