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India’s private sector is on track to record its sharpest expansion in over a year, with the HSBC Flash India Composite PMI Output Index climbing to 61.2 in May, up from 59.7 in April, according to data released by S&P Global on Thursday. This represents the fastest rate of month-on-month growth since April 2024, propelled primarily by a surge in services activity.

Services Sector Powers Growth

The Services PMI Business Activity Index jumped to 61.2 in May from 58.7 the previous month, marking its strongest performance in 14 months. Survey participants cited strong demand both domestically and abroad, alongside increased investments in technology and capacity expansion, as key drivers of the sector’s performance.

"India’s flash PMI indicates another month of strong economic performance. The services sector, especially, is showing firm employment gains, highlighting healthy job creation alongside business growth,” said Pranjul Bhandari, Chief India Economist at HSBC. 

Manufacturing Maintains Momentum

The manufacturing sector also showed resilience, with the Manufacturing PMI inching up to 58.3 in May from 58.2 in April. Although manufacturing output eased slightly to 61.4 from 61.9, overall growth remained solid, supported by strong order inflows and steady hiring.

Rising Cost Pressures

Inflationary pressures intensified across the board in May. Input cost inflation reached a five-month high, while output prices, especially in manufacturing, registered their steepest increase in over 11 years. Despite rising costs, businesses across both sectors continued to ramp up production to meet elevated demand levels.

Business Sentiment Rebounds

Business confidence rebounded in May, reversing the decline observed in April. Firms expressed renewed optimism about future sales and business activity, particularly within the services industry, even amid persistent geopolitical tensions such as India–Pakistan border concerns.

Industrial Production Growth Slows

Meanwhile, industrial output presented a mixed picture. India’s Index of Industrial Production (IIP) rose by 3 per cent in March 2025, slightly above February’s 2.9 per cent but significantly lower than the 5.5 per cent growth seen in March 2024. For Q4 FY25, the IIP grew by 3.6 per cent, marking the second-lowest quarterly growth in the past two years, according to the Ministry of Statistics and Programme Implementation.

Final PMI readings for May 2025 are expected in early June, while April IIP data is scheduled for release on May 28.