India's services and manufacturing activity accelerates in January
What's the story
India's services sector activity witnessed an uptick in January, with the Purchasing Managers' Index (PMI) climbing to 58.5 from December's 58. The rise indicates a strong start for the year and comes after December recorded the weakest expansion in 15 months. However, January's PMI is still below the 2025 average of 59.4, according to data released on February 4.
Sectoral rebound
Manufacturing PMI rises to 55.4
The improvement in the services sector is mirrored by a similar trend in manufacturing, with the PMI for this sector rising to 55.4 in January from December's 55. This indicates a broad-based recovery across key segments of the Indian economy. The uptick in business activity comes amid expectations of stronger external and domestic tailwinds in 2026. Business sentiment has climbed to a three-month high in January, indicating increased confidence among businesses.
Growth prospects
Trade agreements boost growth outlook
India's growth outlook has been bolstered by trade agreements with the European Union and the United States, expected to improve export competitiveness and investment sentiment. On February 2, US President Donald Trump announced a reduction in tariffs on India from 50% to 18%. Economists estimate that this US trade deal alone could add 20-30 basis points to India's GDP growth.
Sectoral dynamics
Job scenario improves, but marginally
The PMI's rise also reflects an improvement in the job scenario, with service providers resuming hiring in January due to rising new work intakes. However, job creation was marginal as most firms preferred to keep workforce numbers unchanged amid sufficient resources for current requirements. The report also noted that services firms signaled more costly prices for eggs, electronic items, meat among others.