India's private sector began 2026 with a notable acceleration in activity as demand strengthened, according to the HSBC flash India Composite Purchasing Managers’ Index (PMI) released on January 23. The index, compiled by S&P Global, rose to 59.5 in January, surpassing both the previous month’s 57.8 and market expectations that forecast a reading of 58.0. Because a PMI score above 50.0 indicates sector expansion, this reading signals positive growth momentum in the private sector.
The rise was primarily driven by a surge in new orders, a crucial indicator of demand, as sales increased in both the manufacturing and services segments. Manufacturing showed a slightly faster expansion rate compared to services, with its PMI climbing from 55.0 in December to 56.8 in January—the highest since October 2025. The services sector also gained traction, with its activity index slightly up to 59.3 from 58.0 the prior month.
Pranjul Bhandari, HSBC's chief India economist, noted that despite the rise in manufacturing PMI, January's figure remained below the 2025 average. However, after momentum waned late in 2025, new orders rebounded notably, led predominantly by a quicker recovery in domestic demand. Export orders also achieved their strongest growth rate in four months, an encouraging sign amid ongoing trade challenges.
Of particular interest, exports expanded even after the United States imposed 50% tariffs on Indian goods last year, despite U.S.-India trade talks having stalled previously. Leaders from both countries are continuing discussions to restart negotiations on a trade agreement, which could further influence export dynamics.
The improvement in demand prompted private firms to modestly increase staffing, reversing the prior month's stagnation in employment levels. This uplift in hiring reflects growing business confidence and aligns with the overall expansion trend.
Cost pressures have emerged alongside rising activity, with input price inflation reaching a four-month peak. Service providers reported more significant increases in costs compared to manufacturers. Businesses generally transferred these higher costs to customers, resulting in output price inflation climbing to a three-month high.
Optimism among companies rose to a three-month high in January, indicating a resilient economic outlook as India prepares for the upcoming budget announcement on February 1. The budget is widely anticipated to emphasize fiscal consolidation measures.