Key Highlights

• India’s Composite PMI rose to 58.9 in February 2026, up from 58.4 in January.

• The reading marks the fastest expansion in three months.

• Manufacturing activity strengthened, with the PMI rising to 56.9, the highest in four months.

• Services PMI eased slightly to 58.1, though it remains firmly in expansion territory.

• Export demand for services surged, led by the United States, United Kingdom, and China.

• Private sector hiring increased, reaching the strongest pace since October.

• Input cost inflation rose, especially in services due to higher wages, energy, and food prices.

India Private Sector Activity Shows Strong Expansion

India’s private sector recorded stronger growth in February 2026 as business activity expanded across both manufacturing and services. The HSBC India Composite PMI Output Index rose to 58.9, up from 58.4 in January, marking the fastest growth in three months.

A PMI reading above 50 indicates expansion, and levels close to 60 usually signal strong business activity. This improvement suggests that India’s economic momentum remains stable and broad-based despite differences in growth trends between manufacturing and services.

For investors and businesses, the latest PMI data indicates that economic activity remains healthy and corporate revenue growth may continue in the coming months.

Manufacturing Sector Leads the Growth Momentum

The main driver of February’s improvement was a strong rise in manufacturing activity. The HSBC India Manufacturing PMI increased to 56.9 from 55.4, reaching its highest level in four months.

Companies reported stronger domestic demand, higher factory production, and rising order inflows across multiple industries. Sectors such as capital goods, consumer durables, and intermediate goods manufacturing showed notable improvement.

Businesses also highlighted that infrastructure spending and investment activity supported new orders and encouraged companies to increase production. As a result, manufacturing output expanded at its fastest pace since October.

This trend strengthens the outlook for industries closely linked to the manufacturing cycle, including:

• Capital goods

• Engineering and industrial equipment

• Automobile manufacturing

• Industrial suppliers and logistics

Higher manufacturing activity usually leads to stronger supply chain demand, which can support growth across several related sectors.

Services Sector Growth Moderates but Remains Strong

While manufacturing strengthened, the services sector saw a mild moderation in growth.

The HSBC India Services PMI declined slightly to 58.1 from 58.5 in January. This represents a 13-month low in domestic new order growth within the sector.

Businesses reported that rising competition among service providers and a moderation in certain domestic demand segments contributed to the slower pace of expansion.

However, it is important to note that the services PMI remains well above the 50 mark and higher than long-term averages, indicating that the sector continues to grow at a strong pace even as growth rates normalize. This suggests that the slowdown is more of a growth rotation between sectors rather than a sign of economic weakness.

Export Demand Boosts Services Sector

One of the strongest positive trends in the February survey was the rise in international demand for Indian services.

Export orders for service providers grew at the fastest pace since August 2025. The increase was driven by strong demand from major global markets such as:

• United States

• United Kingdom

• China

This trend highlights the continued global demand for India’s IT services, digital outsourcing, consulting, and professional services.

Even amid global economic uncertainty, international companies continue to rely on Indian firms for cost-efficient technology and business solutions, which supports export growth for the country’s services sector.

Employment Growth Accelerates

Another positive signal from the PMI survey was the rise in employment across the private sector.

Companies increased hiring in February to handle growing workloads and rising order backlogs. Job creation reached its strongest pace since October.

Higher employment levels are important for the broader economy because they support:

• Household income growth

• Consumer spending

• Business confidence

The increase in hiring also indicates that companies expect demand conditions to remain strong in the near future.

Rising Costs Push Up Prices

Despite the strong growth environment, the PMI survey also highlighted increasing inflationary pressures.

Input costs rose sharply, especially in the services sector where they reached the highest level in about two and a half years.

The main factors behind rising costs included:

• Higher food prices

• Rising energy costs

• Wage increases linked to stronger hiring

To protect their profit margins, many companies increased their selling prices. Output prices rose at the fastest pace in six months, reflecting businesses’ efforts to pass higher costs on to customers.

This growing price pressure may become an important factor for policymakers and investors to monitor in the coming months.

Sector Outlook for Businesses and Investors

The PMI data suggests that manufacturing-linked industries may see stronger momentum in the near term.

Rising factory output and stronger new orders typically lead to higher capacity utilization and increased demand for industrial supply chains. This may benefit sectors such as:

• Machinery and equipment

• Metals and industrial inputs

• Logistics and transportation

• Infrastructure and engineering companies

Meanwhile, the services sector is still expanding at a healthy pace but may face margin pressure due to rising costs and competitive pricing, especially in segments affected by wage inflation and operating expenses.

Business Confidence Remains High

Despite cost pressures and some moderation in services demand, business sentiment across India’s private sector remains strongly positive.

Companies expressed confidence that:

• Marketing initiatives

• Technology investments

• Improving demand conditions

will support future growth.

Business optimism reached its highest level in one year, suggesting that firms are preparing for continued expansion rather than expecting a slowdown.

Conclusion

The rise of the Composite PMI to 58.9 in February 2026 confirms that India’s private sector continues to grow at a strong pace. Manufacturing has emerged as the primary driver of growth, supported by strong domestic demand and infrastructure investment.

Although the services sector experienced a slight moderation, it remains firmly in expansion territory and continues to benefit from rising export demand. Increased hiring and strong business confidence further reinforce the positive economic outlook.

At the same time, rising input costs and price pressures will remain important factors to monitor as they could influence inflation trends and future monetary policy decisions.

Overall, the latest PMI data shows that India’s economy remains resilient and well-positioned for continued growth, with strong industrial activity, expanding export services, and improving employment supporting the broader economic trajectory.