Business activity across India's manufacturing and services sectors hit a three-month high in July, according to a flash survey by HSBC Holdings Plc. The reading signals notable uptick in the country's private sector, with increased new business intakes and output.
HSBC's flash India composite purchasing managers' index (PMI), compiled by S&P Global, rose to 61.4 this month from June's final reading of 60.9, marking three years of expansion. A reading above 50 signals growth, while below 50 indicates contraction.
The index, which adjusts for seasonal variations, underscores significant growth well above its long-term average. Both goods producers and service providers contributed to this upturn, with manufacturing leading the charge.
“The Flash Composite Output Index signalled continued robust growth in India’s private sector. The rise in output in July was led by a further increase in business activity in the manufacturing sector, while the pace of expansion in services output also accelerated and remained well above its long-run average," noted Pranjul Bhandari, chief India economist at HSBC.
The data also reflects a rise in business optimism following a dip in confidence in June. However, input cost inflation continued to climb, pushing firms to increase sales prices.
The HSBC Flash India Manufacturing PMI, a snapshot of factory conditions, hit a three-month high of 58.5 in July, up from 58.3 in June. This uptick is attributed to favourable market conditions and new business gains, supported by buoyant client demand, enhanced technology, and increased events.
The services PMI also rose to a four-month high of 61.1 this month from 60.5 in June.
Capacity pressures increased as firms faced a rise in outstanding business volumes. "In turn, firms continued to hire extra staff. Aggregate employment expanded at one of the strongest rates seen in just under 19 years of data collection. Job creation was stronger at manufacturing companies than at their services counterparts," it said.
This surge in employment comes amid concerns about the employment scenario in India. The Union Budget for FY25, presented on Tuesday highlighted employment as a key focus. Finance minister Nirmala Sitharaman announced new ‘employment-linked incentive’ schemes, aiming to support first-time employees and bolster job creation through Employees' Provident Fund Organisation enrolment and other measures.
