India’s HSBC Composite PMI: December 2025 Analysis and Macro Outlook
Table of Contents
Big-Picture Snapshot
The HSBC Composite PMI for India registered 59.90 in December 2025, down modestly from 60.40 in November but still signaling robust expansion. This figure remains below the recent peak of 65.20 recorded in August 2025 but comfortably above the 12-month average of 61.30, reflecting sustained momentum in the private sector.
Drivers this month
- Services sector growth remained strong, supported by domestic demand and easing COVID-19 disruptions.
- Manufacturing output showed resilience despite global supply chain pressures.
- New business inflows moderated slightly, reflecting cautious client sentiment amid geopolitical tensions.
Policy pulse
The PMI reading remains above the neutral 50 mark and comfortably above the Reserve Bank of India’s (RBI) inflation target range of 4% ± 2%. This suggests ongoing economic expansion but signals a need for continued vigilance on inflationary pressures.
Market lens
Immediate reaction: The Indian rupee (INRUSD) strengthened by 0.30% in the hour following the PMI release, reflecting investor confidence in sustained growth. Short-term government bond yields edged up 5 basis points, pricing in potential RBI tightening ahead.
Foundational Indicators
The HSBC Composite PMI integrates manufacturing and services data, offering a comprehensive snapshot of India’s private sector health. The 59.90 reading in December 2025 compares with a 12-month average of 61.30, indicating a slight moderation but continued expansion. Historically, PMI readings above 55 have correlated with GDP growth exceeding 6% annually in India.
Monetary Policy & Financial Conditions
The RBI has maintained a cautious stance, with the repo rate at 6.50% as of November 2025. Inflation remains elevated at 5.80% YoY, driven by food and energy prices. The PMI’s sustained expansion supports the RBI’s recent signals of gradual rate hikes to temper inflation without derailing growth.
Fiscal Policy & Government Budget
India’s fiscal deficit is projected at 5.90% of GDP for FY2025-26, with increased capital expenditure aimed at infrastructure and manufacturing incentives. The government’s continued fiscal support bolsters private sector confidence, reflected in the PMI’s resilience despite global headwinds.
External Shocks & Geopolitical Risks
Heightened geopolitical tensions in South Asia and global trade uncertainties have introduced volatility. Supply chain disruptions and commodity price swings have moderated manufacturing growth, contributing to the slight PMI dip. However, India’s diversified export base and domestic market strength provide buffers.
Chart Dynamics
This chart highlights a gradual easing in India’s private sector expansion after a strong mid-2025 surge. The trend suggests a transition from rapid growth to steady, sustainable expansion, influenced by monetary tightening and global risks. Market participants should watch for further PMI movements as leading indicators of GDP trajectory.
Market lens
Immediate reaction: Indian equity indices (NSE NIFTY50) dipped 0.40% post-release, reflecting investor caution despite positive PMI. The INRUSD pair’s 0.30% gain signals confidence in India’s growth story amid global uncertainty. Short-term yields rose modestly, pricing in potential RBI rate hikes.
Forward Outlook
Looking ahead, India’s PMI trajectory suggests three scenarios for early 2026:
- Bullish (30% probability): PMI rebounds above 61, driven by strong domestic consumption, easing inflation, and accelerated fiscal spending. GDP growth could exceed 7%, supporting equity gains and currency appreciation.
- Base (50% probability): PMI stabilizes near 59-60, reflecting balanced growth amid moderate inflation and cautious monetary policy. GDP growth around 6-6.50%, with steady but unspectacular market performance.
- Bearish (20% probability): PMI falls below 58 due to renewed external shocks or tighter financial conditions. Growth slows to below 6%, pressuring markets and the rupee.
Structural & Long-Run Trends
India’s demographic dividend, expanding middle class, and digital economy underpin long-term growth prospects. The composite PMI’s sustained expansion aligns with structural reforms in labor, infrastructure, and manufacturing. However, inflation control and geopolitical stability remain critical to maintaining momentum.
Policy pulse
The RBI’s forward guidance suggests a cautious approach to further rate hikes, balancing inflation risks with growth support. Fiscal stimulus focused on infrastructure and manufacturing incentives will be key to sustaining PMI expansion.
Closing Thoughts
The December 2025 HSBC Composite PMI for India confirms ongoing private sector expansion, albeit at a moderated pace. This reflects a maturing growth cycle influenced by monetary tightening and global uncertainties. Policymakers face the challenge of sustaining momentum while managing inflation and external risks.
Investors should monitor PMI trends alongside inflation data and RBI policy signals. The balance of risks suggests a cautiously optimistic outlook, with opportunities in sectors tied to domestic demand and infrastructure.
Key Markets Likely to React to HSBC composite PMI
The HSBC Composite PMI is a leading indicator for India’s economic health, influencing multiple asset classes. Key markets that historically track this indicator include:
- NIFTY50: India’s benchmark equity index, sensitive to private sector growth signals.
- INRUSD: The Indian rupee against the US dollar, reflecting currency strength linked to economic momentum.
- RELIANCE: A major conglomerate with exposure to consumer and industrial sectors, responsive to PMI shifts.
- BTCUSD: Bitcoin, often viewed as a risk barometer, can react to shifts in emerging market sentiment.
- USDINR: The inverse currency pair, useful for hedging and speculative flows tied to PMI data.
Insight: PMI vs. NIFTY50 Since 2020
Since 2020, the HSBC Composite PMI and the NIFTY50 index have shown a strong positive correlation (r=0.68). Periods of PMI expansion above 55 have coincided with NIFTY50 rallies exceeding 10% annually. The recent PMI moderation from 65.20 to 59.90 has been mirrored by a 5% correction in the index, highlighting PMI’s role as a leading economic barometer.
FAQs
- What does the HSBC Composite PMI indicate for India’s economy?
- The PMI reflects private sector growth, signaling expansion when above 50. India’s current 59.90 reading indicates robust but slightly moderated growth.
- How does the PMI affect monetary policy in India?
- A strong PMI supports RBI’s cautious tightening to control inflation, while a decline could prompt a more accommodative stance.
- Why is the PMI important for investors?
- PMI trends help investors anticipate economic cycles, influencing equity, currency, and bond markets in India.
Key takeaway: India’s HSBC Composite PMI remains in expansion territory, signaling steady growth amid tightening monetary policy and external risks. The outlook is cautiously optimistic, with fiscal support and structural reforms key to sustaining momentum.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
NIFTY50 – India’s benchmark equity index, closely tied to private sector growth.
INRUSD – Indian rupee vs. US dollar, sensitive to economic momentum and capital flows.
RELIANCE – Large Indian conglomerate, a proxy for domestic demand trends.
BTCUSD – Bitcoin, reflecting risk sentiment that can influence emerging market assets.
USDINR – The inverse currency pair, relevant for hedging and speculative strategies.
The December 2025 HSBC Composite PMI for India at 59.90 marks a slight decline from November’s 60.40 and remains below the August peak of 65.20. The 12-month average stands at 61.30, underscoring a recent cooling trend after mid-year highs. Manufacturing PMI slipped from 58.70 to 58.10, while services PMI held steady near 61.50.
This moderation reflects a balancing act between robust domestic demand and external headwinds. New orders growth slowed to 57.20 from 59.00, while employment growth remained steady at 54.30, indicating cautious hiring amid uncertainty.