Buoyant global demand continues to support India’s economic output, says S&P Global

Operating conditions across India's private sector continued to improve in July, with a sharp expansion in total sales, export orders and output levels, S&P Global said on Thursday, citing its latest HSBC flash purchasing managers index (PMI) data.

At 60.7 in July, the seasonally adjusted composite output index, which measures the monthly change in the combined output of India's manufacturing and service sectors – was little-changed from June's final print of 61, signalling another month of high growth, S&P said.

The headline figure remained well above its long-run average of 54.8, the credit rating and intelligence provider said. Goods producers registered a faster increase in output than service providers as the pace of expansion picked up to the strongest since April 2024.

There was a softer upturn in services activity during July, though growth remained sharp by historical standards, S&P said.

Its manufacturing purchase managers index, which combines data on new orders, output, jobs, supplier delivery times and inventories, rose from 58.4 in June to 59.2 in July, its highest reading in almost 18 years and indicative of a robust improvement in the health of the manufacturing industry. The manufacturing PMI output index stood at 62.5 in July, compared to 62.1 in June.

The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.

As was the case for output, new orders increased to a greater extent in the manufacturing industry than in the service economy, as growth quickened in the former and eased in the latter, the S&P said.

Fastest sales growth in a year

At the composite level, overall sales expanded at the fastest pace in exactly a year. The strong performance in the composite index was bolstered by growth in total sales, export orders, and output levels, the statement quoted Pranjul Bhandari, chief India economist at HSBC, as saying.

“Indian manufacturers led the way, recording faster rates of expansion than services for all of the three aforementioned metrics. Meanwhile, inflationary pressures continue to heat up as both input costs and output charges rose in July," he said.

Bhandari also said business confidence fell to its lowest since March 2023, while employment growth moderated to its weakest pace in 15 months.

S&P said July data highlighted a pick-up in cost pressures across the private sector. According to monitored firms, aluminium, cotton, food items like cooking oil, egg, meat and vegetables as well as rubber, steel and transportation saw prices increase.

The rate of inflation was solid, but below its long-run average. Services companies recorded a faster increase in input prices than their manufacturing counterparts, S&P said.

The RBI estimates India’s economy will grow at 6.5% in the current financial year. The June quarter is expected to have seen 6.5% growth, followed by a 6.7% expansion in the September quarter, 6.6% in the December quarter and 6.3% in the March quarter. Risks are evenly balanced, according to the RBI.