While the manufacturing sector showed resilience, with the PMI rising to a six-month high of 58.0 from 56.4 in December, this was countered by a notable decline in the services index, which fell to 56.8 in January
India's private sector activity dipped to its slowest growth rate in over a year during January this year, according to HSBC flash India Composite Purchasing Managers' Index (PMI), conducted by S&P Global. It eased to a 14-month low of 57.9 in January from a four-month high of 59.2 in the previous month.
However, the index has been above the 50-mark separating expansion from contraction for three-and-a-half years, the longest continuous growth streak since mid-2013.
While the manufacturing sector showed resilience, with the PMI rising to a six-month high of 58.0 from 56.4 in December, this was countered by a notable decline in the services index, which fell to 56.8 in January—the lowest reading in 26 months—down from 59.3.
Even as the firms ramp up staff hiring at an unprecedented rate, the data highlights potential vulnerabilities in the economic performance of the country, as the services industry is the major engine for India.
“The rise in new export orders was especially noticeable and the easing of input cost inflation is also good news for manufacturers. The cooling in growth in new domestic business in the services sector, however, highlights a potentially emerging weak spot in the economy," stated Pranjul Bhandari, chief India economist at HSBC.
He also noted that new export business for service providers looks set to maintain its growing momentum.
There was also a striking disparity in demand indicators as manufacturers experienced a notable increase in new orders and output but service providers faced the weakest new sales figures in 14 months.
Meanwhile, job creation strengthened across the two tracked sub-sectors. January's expansion in aggregate employment was the best registered since comparable data became available in December 2005.
India's Services PMI spiked to 60.9 in August but has been below that ever since. In its earlier report for November, HSBC highlighted that the downside to this was an intensification of price pressures, with input costs seeing their highest increase in 15 months and selling prices increasing at their fastest rate in almost 12 years.
India's economy is expected to grow at a four-year low of 6.4% in FY25, a significant drop from 8.2% growth in FY24, according to the government data released earlier this month.
The services sector contributes more than half of the country’s GDP.