India's private sector has kicked off FY26 with significant momentum, as HSBC's Flash Composite Purchasing Managers' Index (PMI) for April surged to 60, its highest in eight months, compared to 59.5 in March. This reading signals a strong expansion in business activity, particularly in the manufacturing and services sectors.

The Composite PMI—a key indicator that measures activity in both the manufacturing and services sectors—remained above the crucial 50-mark for the second consecutive month, indicating continued expansion.

Boost from Export Orders and Tariff Relief

One of the biggest drivers of this uptick was a sharp rise in new export orders. This was largely attributed to a temporary 90-day pause in tariff implementation, which encouraged global buyers to ramp up orders.

According to Pranjul Bhandari, Chief India Economist at HSBC, this export surge translated into increased output and job creation, benefitting both manufacturers and service providers. The synergy between the two key sectors points to a broad-based recovery and signals improved confidence among businesses.

Global Headwinds Exist but India Remains Resilient

While India’s domestic economy is gaining momentum, the global economic outlook remains uncertain. The International Monetary Fund (IMF) released its updated projections on April 22, where it downgraded global growth expectations due to lingering trade tensions and geopolitical instability.

• The US economy is now expected to grow 1 percentage point slower than previous forecasts.

• China, another global giant, saw a more significant 1.3 percentage point cut in its growth forecast.

Despite these headwinds, India's economic fundamentals remain robust. The IMF trimmed India’s FY26 GDP growth forecast only marginally—from 6.5% to 6.2%. For FY27, it predicts 6.3% growth, suggesting continued resilience.

Domestic Demand: The Key Growth Pillar

India's domestic demand is emerging as a critical shield against global uncertainties. While other major economies are facing demand slowdowns, India continues to benefit from:

• Strong consumer sentiment

• Government-led capex initiatives

• Rising infrastructure investments

• A relatively stable inflation environment

These factors have enabled companies across sectors to maintain positive momentum.

Employment and Output Expand Together

The employment sub-index also showed a positive reading, suggesting that companies are hiring more workers to meet increased demand. This is an encouraging sign, especially in the context of a global labour market that remains tight and uncertain.

In tandem, output levels across both manufacturing and services expanded, showing that the growth is not skewed towards one segment.

This dual expansion also indicates that companies are confident about future prospects, enough to invest in both production capacity and manpower.

PMI as a Predictor of Growth

Historically, the Purchasing Managers' Index (PMI) has been a reliable leading indicator of economic growth. A sustained reading above 50 not only indicates expansion but often translates into better GDP performance in the following quarters.

The April reading of 60 suggests that India is on track to outperform peers, at least in the short term.

Comparison with Past Performance

To put it in context:

• The PMI had slipped below 59 in January and February, raising concerns over a possible slowdown.

• The rebound in March to 59.5 followed by April’s rise to 60 confirms that this was a temporary dip rather than a long-term trend reversal.

The latest PMI reading also comes well above the long-term average, indicating that India's economic growth is currently operating at a higher-than-usual pace.

Sector-wise Breakdown: Manufacturing and Services

Manufacturing Sector Highlights:

• Benefited significantly from increased foreign orders

• Witnessed inventory build-up ahead of anticipated demand

• Firms reported input price stability, helping margins

Services Sector Highlights:

• Saw a rise in customer bookings, particularly in IT, finance, and transport

• Companies expanded their hiring plans

• Margins were supported by limited cost-side inflation

IMF’s Take on India’s Macroeconomic Outlook

While the IMF's April update acknowledged India’s strong domestic fundamentals, it cautioned that the global economic environment will remain a drag on emerging markets.

India, however, remains a bright spot due to its demographic dividend, proactive monetary and fiscal policies, and growing urban consumption base.

The revised 6.2% growth forecast for FY26, though slightly lower than previous estimates, is still among the highest for any major economy.

Investor Sentiment and FII Flows

Global investors are also taking note of India’s resilience and domestic-driven growth model. Foreign Institutional Investors (FIIs) have been net buyers in recent sessions, further signalling confidence in the India story.

Should this momentum continue, India could see an uptick in capital inflows, which will support both equity markets and the rupee.

Conclusion

India’s private sector has made a strong start to FY26, with HSBC’s Flash Composite PMI hitting 60, the highest in eight months. The rise was led by export orders, employment growth, and robust domestic demand.

Even as the global economy slows, India’s fundamentals remain sound, supported by a buoyant services sector, growing manufacturing base, and stable macroeconomic environment.

This PMI data reinforces confidence in India’s ability to weather external shocks, making it one of the most promising growth stories in the global economy today.

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