AI Sentiment: Bullish
Reason: India's economy shows solid momentum with a four-month high business growth, an increase in private sector activity, and a stronger manufacturing and services sector. Despite challenges, business confidence remains strong hinting at continued growth.
As 2024 closed, India's economy showcased solid momentum, with business growth hitting a four-month high. The upbeat trend was highlighted by the latest Purchasing Managers' Index (PMI), which demonstrated a significant rise in both manufacturing and services sectors. The combined PMI Output Index stood at 56.3 in December, up from 55.2 in November, indicating a stronger increase in private sector activity across the country.
The expansion in the manufacturing sector was largely driven by domestic demand, while the services sector benefits from the easing of COVID-19 restrictions and the increased vaccination drive. The growth in new business orders was the strongest since August 2021, as firms reported improved demand conditions and successful marketing campaigns. The data also revealed that the rate of job creation quickened to the fastest since July 2021, reflecting a more optimistic economic outlook for the country.
However, the survey also shed light on some challenges. Businesses were faced with a sharp rise in input costs, driven by higher raw material prices and increased transportation costs. This resulted in the greatest increase in selling prices since November 2011. Despite these challenges, business confidence remained strong, with companies optimistic about the year ahead.
The Indian economy's robust performance towards the end of 2024 comes as a positive sign, following a year marked by pandemic-induced disruptions. The strengthening manufacturing and services sectors, coupled with growing domestic demand, indicate that the Indian economy is on a path of steady recovery. Firms' confidence in the future also signals that India's growth story could continue into 2025, despite potential headwinds.