India’s Business Growth Slows to 14-Month Low in January
In January 2025, India’s business activity expanded at its slowest rate in over a year, according to recent survey data. The Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, declined to 57.9 from December’s 59.2, marking the lowest reading since November 2023. Despite this slowdown, the index remained above the 50-mark, indicating continued expansion for the 42nd consecutive month.
The services sector, a significant contributor to India’s economy, experienced a notable deceleration. The services PMI dropped to 56.8, the lowest in 26 months, from 59.3 in December. This decline raises concerns about the sustainability of India’s robust economic performance, especially with government estimates projecting slower overall growth of 6.4% for the current fiscal year.
Conversely, the manufacturing sector demonstrated resilience. The manufacturing PMI rose to a six-month high of 58.0, up from 56.4 in December, indicating strong output and new orders. This growth was further supported by a surge in international demand, leading to the fastest expansion in exports in six months.
Employment trends were positive across both sectors. Composite job creation reached a record high since the survey’s inception in December 2005, reflecting firms’ confidence in sustained demand. However, inflationary pressures intensified, particularly in the services sector, where input costs rose at the fastest pace since August 2023. Firms responded by increasing prices, suggesting that rising costs are being passed on to consumers.
The mixed outlook presents challenges for policymakers. While manufacturing firms expressed optimism, services companies were more cautious, citing concerns over competition. The Reserve Bank of India may face difficulties in deciding on monetary policy adjustments, especially considering the heightened inflation and the need to support growth.
