India's private sector output increased at the quickest rate in four months, according to preliminary survey results, helping the economy close 2024 on a high note, bolstered by stronger demand in services and manufacturing and record job creation.
Asia's third-largest economy grew at a slower 5.4 percent last quarter, but lower inflation is projected to boost demand among private-sector enterprises, improving the forecast for next year.
Monday's HSBC December flash India Composite Purchasing Managers' Index (PMI), calculated by S&P Global, increased to 60.7 this month, matching August's figure, after falling to 58.6 in November.
The 50-level distinguishes expansion from contraction, and the business activity index has been above 60 for all but three months this year. Such strength has not been witnessed since 2008, when the global financial crisis struck, implying strong private sector growth.
"The small rise in the headline manufacturing PMI in December was mainly driven by gains in current production, new orders and employment," according to Ines Lam, HSBC's economist.
"The expansion in new domestic orders quickened, suggesting a pick-up in growth momentum in the economy." The PMI for the dominating services sector jumped to a four-month high of 60.8 from 58.4 in November, while the index for manufacturing was 57.4, up from 56.5 the previous month.
Service providers drove the increase in revenues, with the new business sub-index reaching its highest level since January. Improving worldwide demand for goods and services also increased sales, with the former growing faster than the latter.
This enhanced the business forecast for 2025, and overall optimism reached its greatest level since September of last year, prompting businesses to hire more employees at the fastest rate since the survey began in late 2005.
Both manufacturing and services saw a new peak in employment creation.
Inflationary pressures lessened in December following two months of sharper increases. Firms did, however, raise selling prices again, albeit at a slower pace than in November, when they reached a near 12-year high.
That would bring some solace to newly appointed Reserve Bank of India Governor Sanjay Malhotra after consumer inflation fell below expectations at 5.48 percent last month, with economists expecting a rate drop in February 2025, according to a Reuters poll.
