India’s economy is juggling two realities: a sluggish manufacturing sector and booming growth in services and crypto

November’s numbers are out, and they tell a story of highs and lows that reflect the country’s complex economic situation. Manufacturing slowed, services soared, and crypto continues to dominate despite regulatory crackdowns and heavy taxation.

India's economy is presenting a contrasting picture with a slowing manufacturing sector and a booming growth in services and cryptocurrency.

Fresh data for November shows that manufacturing lost some steam, but services continued to soar, and crypto remained a hot topic despite regulatory crackdowns and heavy taxation.

The manufacturing purchasing managers' index (PMI) slipped marginally to 57.3 compared to 57.5 in October. On the other hand, the services index rose to 59.2 from 58.5, as per preliminary data from HSBC Holdings. Together, they pushed the composite index up to 59.5, a slight increase from 59.1.

An index above 50 indicates growth, while anything below 50 signals a contraction. So, while manufacturing softened, the services sector carried the weight, reaching its highest employment index since December 2005, driven by strong demand and better business conditions.

Manufacturing slows, inflation bites

Despite the slowdown in the manufacturing sector, HSBC's Chief India Economist Pranjul Bhandari said it "managed to outpace expectations." However, rising costs are posing a significant challenge.

Manufacturers are grappling with higher raw material prices, and in the services sector, food and wages are driving up inflation. As a consequence, private companies continued to increase their prices in November, passing on the burden to consumers.

Moreover, urban spending is slowing down, adding to the concerns. Economists are adjusting their GDP growth projections for the year ending March 2025.

Goldman Sachs has now trimmed its forecast to 6.4%, reflecting these challenges in the economy. Despite this, the services sector remains a bright spot, fueled by sustained demand and businesses aiming to scale up.

Crypto thrives despite tough rules

India's crypto scene seems largely unfazed by economic slowdowns. It continues to flourish, even under some of the world's strictest regulations.

The country levies a 30% tax on crypto gains and a 1% tax on each transaction, known as tax deducted at source (TDS). These policies have prompted some investors to shift to international exchanges with friendlier rules.

Despite this, India leads the world in crypto adoption, ranking first on the Global Crypto Adoption Index and second in the Central and South Asia region for total crypto value received.

In December 2023, India's Financial Intelligence Unit (FIU) cracked down on nine offshore exchanges, including Binance, Kraken, and KuCoin, for not adhering to anti-money laundering laws.

The FIU directed the Ministry of Electronics and Information Technology (MeitY) to block the URLs of these exchanges for Indian users.

However, this block proved less effective than intended. Users who had already downloaded these apps could still access them, and some platforms remained available for new downloads.

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