Business activity across India's private sector expanded at a softer pace in December 2025, according to the latest HSBC survey data. The key indicator of economic health, the HSBC Flash India Composite Output Index, which measures the combined output of manufacturing and services, registered 58.9 in December, down from 59.7 in November.
Growth Momentum Eases but Remains Strong
Despite the month-on-month dip, the index reading was significantly above the crucial 50.0 threshold, which separates expansion from contraction. This indicates that the Indian economy continued to witness substantial growth, albeit at the slowest rate recorded since February 2025. HSBC analysts noted that the index pointed to "the softest output growth since February."
The moderation was broad-based, affecting both the manufacturing and service industries. The primary driver behind the slowdown was a more moderate increase in new orders compared to previous months. However, demand conditions remained fundamentally healthy, with new business inflows continuing to show strong momentum, supported by positive customer demand.
Sectoral Performance and Employment Trends
The manufacturing sector experienced a noticeable deceleration. The HSBC Flash India Manufacturing PMI fell to 55.7 in December from 56.6 in November. While factory activity and new orders grew at a slower pace, the sector maintained a solid expansion rate that was still above its long-term average. The report highlighted that December's reading indicated the most modest improvement in the sector's health in the past two years.
On the employment front, the survey revealed minimal changes. Workforce numbers across private sector companies saw little movement, with employment levels remaining largely stable. This suggests a cautious approach, with firms neither engaging in significant hiring nor making redundancies during the month.
Business Confidence and Inflation Outlook
A notable finding from the December survey was a dip in business sentiment. Confidence regarding future output diminished, marking the third consecutive monthly decline and reaching its lowest level since July 2022. Organizations displayed increased caution about the year-ahead outlook.
On a positive note, the inflation scenario appeared subdued. Cost pressures were stable, contributing to a benign input inflation environment. Additionally, suppliers' delivery times shortened in December, pointing to an improvement in supply chain efficiency for manufacturers.
Looking ahead to 2026, firms maintained positive expectations that business growth would continue. However, the overall level of optimism has weakened in recent months. The HSBC PMI data ultimately underscores that while India's business growth rate moderated at the end of 2025, the economy retains robust expansionary momentum heading into the new year.
