India business activity fastest in at least two decades, price rises sharp, PMI shows

India private sector activity expanded at the fastest pace on record in August, fuelled by a robust surge in demand led by the dominant services sector, which allowed firms to hike prices at the fastest clip in over 12 years, a survey showed on Thursday (August 21, 2025).

The latest results stand in contrast to expectations for a slowdown in economic growth in Asia’s third-largest economy to average 6.4% this fiscal year after an unexpectedly strong 7.4% expansion during the first three months of 2025.

HSBC’s flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 65.2 in August from 61.1, confounding expectations in a Reuters poll for a decline to 60.5.

It was the highest reading since the survey began in December 2005 and remained above the 50-mark that separates growth from contraction for the 49th month.

Record expansion was underpinned by the sharpest uptick in total new orders — a key gauge of demand — in nearly 18 years.

The services sector led growth, with its activity index soaring to a survey high of 65.6. The manufacturing sector also showed significant strength — its preliminary PMI rose to 59.8, its highest reading since January 2008.

While that boosted job creation, the survey also showed companies passing on increases in input costs to customers. The output price index increased to an over 12-year high of 55.8 from 53.5 in July.

That also contradicts the recent trend of easing inflation in official data, which dropped to an eight-year low of 1.55% last month.

The Reserve Bank of India, which targets inflation in a 2-6% range, started cutting interest rates early this year to stimulate the economy and paused at the latest meeting but is expected to cut again next quarter.

Firms remained optimistic, with sentiment for the year ahead strengthening to its highest since March.