India’s private sector experienced its fastest growth in four months in December 2024, as revealed by preliminary survey data. Buoyed by robust demand in both services and manufacturing, as well as record job creation, the economy concluded the year on a positive note.
Solid Growth Across Sectors
The HSBC December flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 60.7, matching August’s figure and significantly improving from November’s 58.6. The PMI readings, where a value above 50 signifies growth, highlight a continued expansion of business activity in all but three months of 2024. Such consistent growth has not been seen since 2008, underscoring strong private sector momentum.
Services Sector Leads Expansion: The services sector was a key driver, with its PMI reaching 60.8 in December, up from 58.4 in November. This marks a four-month high and reflects a surge in new business activity, particularly domestic demand.
Manufacturing Sector Strengthens:
Manufacturing also showed improvement, with its PMI rising to 57.4 in December from 56.5 the previous month. Gains were attributed to increased production, new orders, and employment growth.
Boost in Domestic and International Demand
Economic activity in December benefited from heightened domestic demand. New domestic orders grew at a faster pace, signaling renewed momentum in the economy. Service providers led this trend, achieving their highest new business sub-index levels since January 2024. International demand also contributed positively, with goods experiencing a faster rise in export orders than services.
Record Employment Growth
Both manufacturing and services sectors recorded unprecedented employment growth in December. The hiring surge was the fastest since the PMI survey began in 2005. Companies responded to increasing demand by expanding their workforce, reflecting optimism for sustained growth in 2025.
Inflation Eases, Supporting Outlook
December saw easing inflationary pressures after two months of steep increases. Although firms continued to raise selling prices, the rate of increase was slower than November’s near 12-year high. Lower consumer inflation, which came in at 5.48% last month, further supports a positive outlook for 2025.
This inflation relief aligns with market expectations of a rate cut by the Reserve Bank of India (RBI) in February 2025. Newly appointed RBI Governor Sanjay Malhotra will likely welcome these developments as they provide a more conducive environment for economic growth.
Economic Challenges and Opportunities
While India’s GDP grew at a softer 5.4% in the last quarter of 2024, easing inflation and robust private sector performance indicate potential for stronger growth in 2025. According to HSBC economist Ines Lam, the small rise in the headline manufacturing PMI was primarily driven by gains in current production, new orders, and employment.
Business Optimism Soars
Business confidence for 2025 has risen to its highest level since September 2023. Companies are increasingly optimistic about the future, driven by improving demand conditions and sustained economic resilience. Combining stronger domestic and international sales, easing price pressures, and record job creation provides a solid foundation for sustained expansion.
Conclusion
India’s private sector closed 2024 on a high note, reflecting robust growth in both services and manufacturing. With inflation easing, demand rising, and businesses optimistic, the outlook for 2025 appears promising. Policymakers and business leaders will aim to leverage these favorable conditions to sustain and enhance economic momentum in the year ahead.
