India’s Services and Manufacturing Sectors Gain Momentum in January

India’s services sector demonstrated notable growth in January, with the Purchasing Managers’ Index (PMI) rising to 58.5, up from 58 in December. This increase indicates a robust start for the year, especially following December’s performance, which marked the slowest expansion in 15 months. While January’s PMI reflects improvement, it remains below the 2025 average of 59.4, as detailed in data released on February 4.

Broad-Based Recovery Across Sectors

The uptick in the services sector is complemented by a similar trend in manufacturing, where the PMI rose to 55.4 in January from 55 in December. This suggests a broad-based recovery across significant segments of the Indian economy. Enhanced business activity aligns with growing expectations for stronger external and domestic support in 2026. Business sentiment reached a three-month high in January, reflecting increased confidence among enterprises.

India’s economic outlook has been positively influenced by recent trade agreements with the European Union and the United States. These agreements are anticipated to improve export competitiveness and foster investment sentiment. Notably, on February 2, US President Donald Trump announced a reduction in tariffs on imports from India, decreasing them from 50% to 18%. Economists estimate that this trade deal could enhance India’s GDP growth by 20-30 basis points.

Job Market and Price Trends

The rise in the PMI also signals a slight improvement in the job market. Service providers began resuming hiring in January due to an increase in new work intakes. Nonetheless, job creation remained marginal, as many firms opted to maintain their current workforce levels, citing sufficient resources to meet existing demands.

The report highlighted that service firms reported rising costs for various items, including eggs, electronic goods, and meat. This trend in price increases may reflect broader inflationary pressures within the economy.

Overall, the positive movements in both the services and manufacturing sectors indicate a promising start to the year for India’s economy, with expectations of continued growth supported by favorable external conditions and strategic trade partnerships.