India’s economic momentum strengthened further in May 2025, with business activity hitting a 13-month high despite external headwinds, including geopolitical tensions with Pakistan. According to preliminary data from HSBC, the HSBC Composite Purchasing Managers’ Index (PMI) rose to 61.2 in May, up from 59.7 in April. This marks the strongest expansion in private sector output since April 2024, driven by broad-based strength across manufacturing and services.
Highlights:
Composite PMI climbs to 61.2 in May, highest in 13 months.
Services sector hits 14-month high; manufacturing at 11-month peak.
Employment growth strongest since December 2005.
Input cost inflation hits 6-month high, but strong demand allows pass-through.
IMF forecasts India to grow at 6.2% in 2025 despite global slowdown.
Robust Domestic Demand and Export Orders Drive Expansion
The uptick in the Composite PMI was led by a robust increase in both new orders and production activity across sectors. According to Pranjul Bhandari, Chief India Economist at HSBC, May’s flash PMI data reflect “another month of strong economic performance,” particularly in the manufacturing sector where growth in production and new orders, while slightly cooler than April, remained resilient. The surge in demand was bolstered by strong international interest in Indian goods and services, with export orders growing at their fastest pace in over a year.
India’s resilient economic backdrop stands in contrast to global contraction trends, especially in key trading nations. While many economies, particularly in Asia and Europe, are witnessing a downturn in business activity, India’s PMI strength reflects a favorable demand environment, improved supply chains, and rapid diversification of export markets amid global trade uncertainty.
Highlights:
International demand lifted export orders to highest pace in 12 months.
Manufacturing PMI rose marginally to 58.3 in May from 58.2 in April.
Flash Manufacturing PMI hit an 11-month high, driven by strong production pipelines.
Services Sector Leads the Upswing, Employment Soars
The services sector was the standout contributor to May’s business performance, with the Flash Services PMI hitting its highest level in 14 months and matching a 16-month high. Key drivers included rising consumer demand, greater business confidence, and increased investment in infrastructure and digital platforms.
In parallel, employment levels rose significantly, with the rate of job creation reaching its fastest pace since December 2005. Service providers, in particular, ramped up hiring to meet growing workloads, reinforcing optimism about sustained recovery in domestic consumption and discretionary spending.
Highlights:
Services PMI led the Composite index surge, hitting a 14-month high.
Employment rose at the fastest pace since December 2005, with hiring robust in services.
Companies anticipate sustained sales growth backed by domestic demand momentum.
Tariff Concerns and Cost Pressures Surface Despite Strong Sentiment
Despite the broad-based expansion, some manufacturers expressed caution about future output due to uncertainty surrounding tariffs, especially in light of ongoing global trade tensions. While the threat of elevated tariffs—particularly from the US and China—has moderated in recent weeks, firms remain wary of potential disruptions to global supply chains and export opportunities.
Input cost inflation also reemerged as a concern, with companies reporting the steepest rise in cost burdens in six months. However, strong demand conditions allowed most businesses to pass on higher input costs to consumers, maintaining profitability.
Highlights:
Inflationary pressures rise to 6-month highs.
Cost passthroughs remain effective due to resilient demand.
Manufacturing outlook tempered by lingering tariff uncertainty.
IMF Maintains India’s Growth Outlook Amid Global Downgrade
India remains a relative bright spot in the global macroeconomic landscape. The International Monetary Fund (IMF) now expects India’s economy to grow at 6.2% in 2025, just 0.3 percentage points lower than the earlier 6.5% estimate. In comparison, the global economy is projected to suffer a sharper 0.8 percentage point decline. The United States and China are expected to contract further, with the latter facing a 1.3 percentage point downward revision.
However, recent de-escalation between Washington and Beijing, including a rollback of proposed 100%+ tariffs, offers some relief to Indian exporters who were anticipating increased trade frictions in Western markets.
Highlights:
IMF pegs India’s GDP growth at 6.2% for 2025, down slightly from 6.5%.
Global growth expected to decline by 0.8 percentage points; US by 0.9%, China by 1.3%.
Indian exporters benefit from partial easing of US-China tariff threats.
Data Releases Ahead
The HSBC flash PMI figures are based on approximately 80-90% of survey responses from 800 companies—400 each in manufacturing and services. Final PMI readings for May are scheduled for early June, with manufacturing data due on June 2 and services data on June 4. Additionally, the Indian government will release Q4 FY25 GDP data on May 30, which will offer deeper insight into the broader economic trajectory as India exits FY25.
Highlights:
Final May manufacturing PMI to be released on June 2.
Final May services PMI due on June 4.
January–March (Q4 FY25) GDP to be published on May 30.
