India business growth at four-month high in January, shows survey

India's business activity expanded at the fastest pace in four months in January on stronger demand, according to a private survey that also showed input costs rising at the quickest rate since August.

The findings indicate Asia's third-largest economy would continue to hold onto its title as the fastest growing major economy in the near-term at least. India will grow 6.9% in the current fiscal year, a Reuters poll showed on Wednesday.

HSBC's flash India Composite Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 61.0 this month, its highest since September, from December's final reading of 58.5.

That put the index above the 50-mark that separates expansion from contraction for the 30th consecutive month.

"The economy grew at a faster pace in January, led by stronger manufacturing output, as well as more robust business services activity," noted Pranjul Bhandari, chief India economist at HSBC.

"New orders rose at a faster pace than a month ago, and within that, international orders were stronger than before."

A manufacturing PMI rose to 56.9 in January from 54.9 last month. Activity in the dominant services industry also accelerated at a sharper rate, with its PMI rising to 61.2 this month from 59.0 in December.

That was primarily due to a strong expansion in demand. Factory new orders grew at the quickest pace in four months while new business in the services sector increased at its fastest rate since July 2023.

Improving demand boosted firms' expectations for the coming 12 months, especially in manufacturing as the future output soared to its highest in over nine years.

Firms continued to hire for a 20th consecutive month, but higher employment generation took place in the services industry.

Although overall output prices rose at a slower rate in January, input costs increased at the sharpest pace since August 2023, indicating price pressures could remain elevated.

India's retail inflation hit a four-month high in December, and a Reuters poll suggested the Reserve Bank of India would keep interest rates on hold until at least July.