Business activity grew at fastest pace in 14 years in April, HSBC survey shows

The Indian economy has made a robust start to the new fiscal year, with private-sector business activity expanding faster during April than it did in March amid a pick-up in sales growth.

The HSBC Flash India Composite Purchasing Managers' Index (PMI) output index, compiled by S&P Global, climbed to 62.2 in April from a revised reading of 61.8 in March, marking the fastest rate of increase in aggregate business activity since June 2010, HSBC said in a survey released on Tuesday. A PMI reading above 50 indicates an expansion from the previous month, and below 50 a contraction. 

The seasonally adjusted index measures the month-on-month change in the combined output of India’s manufacturing and service sectors based on a survey of 400 manufacturers and 400 service providers. 

"Survey participants overwhelmingly attributed the expansion to buoyant demand from domestic and external clients," HSBC said. While growth remained broad-based across the manufacturing and service sectors, manufacturing saw an increase in April, albeit softer than in March, and business activity in the service economy rose to a three-month high during the ongoing month, the survey added.

The data underscores India's position as one of the fastest-growing major economies. The Reserve Bank of India (RBI) expects the economy to grow at 7% in FY25, and according to the government's second advanced estimate, the economy will grow 7.6% in FY24, up from 7.3% in FY23.

“Strong performance in both the manufacturing and service sectors, led by increased new orders, resulted in the highest composite output index since June 2010. In particular, services growth accelerated further in April as new orders in both domestic and international markets rose," said Pranjul Bhandari, chief India economist at HSBC.

"Meanwhile, composite input and output prices moderated in April, although they remained robust. Manufacturing margins improved in April as firms were able to pass on higher prices to customers due to strong demand conditions," Bhandari added.

Earlier, data showed the Indian economy grew by a robust 8.4% in the third quarter on the back of increased government spending and a strong performance in manufacturing, mining, construction and services.

"In line with the recent trend, international sales positively contributed to total order books. In fact, at the composite level, new export orders rose at the fastest rate since the series started in September 2014," the survey said.

"On this front, services companies noted the quicker rate of expansion. Anecdotal evidence pointed to stronger sales to clients in Africa, Asia, Australia, the Americas, Europe and the Middle East," it added.

The Flash Services PMI Business Activity Index came in at 61.7 for April, up from a revised 61.2 in March; the Flash Manufacturing PMI Output Index was 63.2 in April, slightly below the revised figure of 63.3 in March; and the Flash India Manufacturing PMI stood at 59.1 in April, similar to the revised figure for March.

In March, consumer price index (CPI)-based retail inflation came in at 4.85%, falling below 5% for the first time since November 2023. While retail inflation remains above the RBI's  target of 4% it has now remained within its tolerance range of 2-6% for the seventh consecutive month.

Meanwhile, industrial output grew 5.7% in February, up from 4.14% in January and 4.3% in December, after an eight-month low of 2.5% in November. 

"Although prices charged for Indian goods and services rose to a lesser extent in April, the rate of inflation remained above its long-run average," the HSBC survey said.

"According to survey participants, demand strength facilitated the passing on of rising expenses to clients. A stronger increase in the manufacturing industry contrasted with a slowdown in services firms," it added.