In May, India's private sector experienced a notable acceleration, driven primarily by a strong service sector performance. An influx of new business—from both domestic and international markets—sparked rapid expansion in business activity and employment, while business confidence improved for the first time since January.

The HSBC Flash India Composite Output Index, which measures the month-on-month change in combined manufacturing and service output, climbed to 61.2 in May from 59.7 in April, marking the most significant expansion rate seen since April 2024. Although the manufacturing segment experienced a slight slowdown in growth momentum, service providers recorded their fastest output rise in 14 months.

The HSBC Flash India Manufacturing PMI remained relatively stable, moving marginally from 58.2 in April to 58.3 in May, reflecting a steady improvement in the sector's fundamentals. Despite goods producers showing the slowest output growth in three months, service providers reported the fastest increase since March 2024. Order books were buoyed by growing international demand for Indian goods and services, with exports registering the quickest rate of increase in a year.

Underlying data also revealed that sustained job creation enabled companies to manage rising workloads in May. Additionally, there was a notable uptick in prices for Indian goods and services, with the overall inflation rate reaching a six-month high.

Improved sentiment among private sector firms was evident as expectations were upgraded in May, following an eight-month low in confidence observed in April.