India will remain the fastest-growing major economy this year and next, bolstered by heavy government spending.

However, the government will target narrowing the fiscal deficit as a percentage of GDP. The budget for the fiscal year 2024/25, due to be announced later on Thursday, is anticipated to strike a balance between populist measures and fiscal prudence.

The PMI’s new orders sub-index, also supported by international demand, rose sharply to its highest since September, stretching the current sequence of expansion to over two-and-a-half years.

“India’s final manufacturing PMI showed that manufacturing activity accelerated in January. Current output expanded on robust demand, with domestic orders growing at a faster pace than export orders,” noted Ines Lam, economist at HSBC.

Strong demand and with an optimistic year-ahead outlook prompted firms to scale up their buying of raw materials. The future output sub-index strengthened to a 13-month high while purchasing rose at the fastest pace since September.