Indian economy on strong footing: According to a survey released on Tuesday, India’s business activity expanded at its fastest pace in nearly 14 years this month, driven by robust demand. The survey also indicated easing input inflation and positive jobs growth, suggesting that India is well-positioned to maintain its status as the fastest-growing major economy this year, following strong expansion in recent quarters.
HSBC’s flash India Composite purchasing managers’ Index (PMI), compiled by S&P Global, rose to 62.2 this month from March’s final reading of 61.8. The reading has consistently remained above the 50-mark separating expansion from contraction since August 2021.
Pranjul Bhandari, chief India economist at HSBC, noted, “Strong performance in both the manufacturing and service sectors, led by increased new orders, resulted in the highest composite output index since June 2010.”
The strong expansion was primarily driven by services activity, with the index rising to a three-month high of 61.7 from March’s 61.2, thanks to an acceleration in new business, which is a key gauge for demand. The manufacturing PMI remained strong at 59.1 this month, with both output and new orders for goods continuing to grow at a robust pace, albeit slightly slower than last month. Overall international demand was solid, and the composite sub-index rose to the highest level since it was added to the survey in September 2014.
Strong sales improved the business outlook for the coming 12 months compared to the four-month low in March. Efforts to meet rising demand supported jobs growth, which was most pronounced in manufacturing, increasing at the fastest pace in one-and-a-half years. However, employment generation among services firms was slower than in March.
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Input costs cooled for both goods producers and their services counterparts, but demand strength enabled passing on expenses to customers. Manufacturing firms experienced a stronger increase in output costs, while the services industry saw a slower rise. Bhandari added, “Manufacturing margins improved in April as firms were able to pass on higher prices to customers due to strong demand conditions.”
The survey results suggest that inflation may not fall quickly enough for the Reserve Bank of India to consider rate cuts in the near future, as price rises are likely to remain above the central bank’s 4% medium-term target for an extended period.
