India’s Private Sector Activity Loses Steam Amid Weak Demand and Tariff Strain

India’s private sector activity slowed to a five-month low in October amid a deceleration in the services economy, weak demand, and the impact of US tariffs, according to the HSBC Flash India Purchasing Managers’ Index (PMI) data.

The Flash Composite PMI eased to 59.9 in October from 61.0 in September. The Services PMI fell to 58.8 from 60.9, while the Manufacturing PMI Output Index rose to 62.4 from 61.1. The overall Manufacturing PMI edged up to 58.4 from 57.7 in the previous month.

A PMI reading above 50 indicates expansion, while a reading below 50 signals contraction.

S&P Global, which compiled the PMI, noted that October data reflected weaker expansions in aggregate new orders and output, the slowest since May, amid muted international sales. However, businesses remained optimistic about growth prospects despite sentiments being rattled in the September quarter.

While new orders placed with private-sector firms expanded sharply, the pace of growth was the slowest in five months. “The softer increase in sales stemmed from a loss of growth momentum in the service economy, while goods producers registered a slightly quicker rise than in September,” the report said.

According to S&P Global, "there were some concerns around competitive pressures, market conditions and demand trends. Nevertheless, firms hope to benefit from the GST (goods and services tax) rate cut, marketing efforts, new product releases and tech investment."

October data also showed a moderate rise in private-sector employment, with the rate of growth similar to September’s, the slowest since April 2024.

On the GST front, both manufacturers and service providers benefited from softer cost pressures, leading to the weakest rise in expenses since June.

"The HSBC flash manufacturing PMI picked up a tad, likely on the back of GST rate cuts which are buoying domestic demand and curbing cost pressures. New orders and output, both, are above the average Jan-Jul levels. However, the drag from US tariff continues to show up in new export orders and future optimism, which remain below the Jan-Jul levels,” said Pranjul Bhandari, Chief India Economist at HSBC.