India business growth at 4-month high in January: PMI

India's business activity grew at its greatest rate in four months in January due to increased demand, according to a private survey that also showed input costs increased at their sharpest rate since August.

The results suggest that, at least in the near future, Asia's third-largest economy will maintain its position as the major economy with the quickest growth rate. According to a Reuters survey, India would grow 6.9% in the current fiscal year.

HSBC's flash India Composite Purchasing Managers' Index (PMI), calculated by S&P Global, increased to 61.0 this month, its highest level since September, up from 58.5 in December.

For the 30th straight month, the index rose above the 50-point threshold between growth and contraction.

"The economy grew faster in January, led by stronger manufacturing output and more robust business services activity," noted Pranjul Bhandari, chief India economist at HSBC.

"New orders rose faster than a month ago, and within that, international orders were stronger than before."

A manufacturing PMI rose to 56.9 in January from 54.9 last month. Activity in the dominant services industry also accelerated sharply, with its PMI rising to 61.2 this month from 59.0 in December.

That was primarily due to a strong expansion in demand. Factory new orders grew quickly in four months, while new business in the services sector increased at its fastest rate since July 2023.

Improving demand boosted firms' expectations for the coming 12 months, especially in manufacturing, as future output soared to its highest level in over nine years.

Firms continued to hire for the 20th consecutive month, but higher employment generation occurred in the services industry.

Although overall output prices rose slower in January, input costs increased at the sharpest pace since August 2023, indicating price pressures could remain elevated.

India's retail inflation hit a four-month high in December, and a Reuters poll suggested the Reserve Bank of India would hold interest rates until at least July.