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Business News/ Economy / India’s economy surges further ahead in February
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India’s economy surges further ahead in February

Services activity reached a seven-month high, while manufacturing growth is at a five-month high, as per the HSBC Flash Composite PMI

Manufacturing activity accelerated at a sharper pace in February. (AP)Premium
Manufacturing activity accelerated at a sharper pace in February. (AP)

NEW DELHI : The Indian economy, which expanded at a four-month high in January, continued to strengthen in February, seeing accelerations in both manufacturing and services sectors during the month. 

While services sector growth climbed to a seven-month high in February, manufacturing sector growth reached a five-month high, firming India’s position as one of the fastest-growing major economies.

The HSBC Flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, climbed to 61.5 in February from a revised reading of 61.2 for January—well above the 50-point threshold that differentiates expansion from contraction.

The seasonally adjusted index measures month-on-month change in the combined output of India’s manufacturing and service sectors.

“Growth improved in both the manufacturing (five-month high) and services (seven-month high) economies, with survey participants attributing the upturn to buoyant demand conditions, investment in technology, efficiency gains, expanded clientele and favourable sales developments," HSBC said in a report released on Thursday.

The latest flash PMI numbers, based on a survey of 400 manufacturers and 400 service providers, follow data showing a robust 7.6% growth in the Indian economy in the second quarter. 

This growth was supported by increased government spending and strong performance in manufacturing, mining, and construction, apart from the services sector. 

The Reserve Bank of India in December revised its growth forecast for the Indian economy to 7% for the current fiscal year, an increase from its earlier projection of 6.5%. This revision was based on higher-than-anticipated growth in the first two quarters of this financial year.

“The pace of acceleration in the output of India’s manufacturers and service providers, combined, was at a seven-month high in February. Encouragingly, new export orders rose sharply, particularly for goods producers," said Pranjul Bhandari, chief India economist at HSBC.

“Input prices rose at the slowest pace in three-and-a-half-years. Producers were able to do both—lower the rate of increase in output prices and improve margins," Bhandari added. 

The HSBC Flash Services PMI came in at 62 for February, up from 61.2 in January and 59 in December. The HSBC Flash Manufacturing PMI in February was 56.7, compared with 56.9 in January and 54.9 in December.

The February data, similar to the inaugural data in January, highlighted a faster-paced economy driven by stronger manufacturing output and robust business services activity.

Activity in the manufacturing industry also accelerated at a sharper rate, with the HSBC Flash India Manufacturing PMI Output Index rising to 60.4 in February from 59.7 in January.

Survey participants attributed the upturn to buoyant demand conditions, investment in technology, efficiency gains, expanded clientele, and favourable sales developments.

“New orders across India’s private sector rose for the thirty-first successive month halfway through the final fiscal quarter. Equal to January, the rate of expansion was sharp and the joint-best in seven months," the survey said. 

“As was the case for output, services firms noted a stronger increase in sales than their manufacturing counterparts," it added. 

The rise in the HSBC Flash India Composite PMI comes at a time when inflation remains within RBI’s tolerance level and amid a moderation in exports and a fall in core sector growth.

In December, retail inflation fell to 5.1% from 5.7% in November, aided by a slower rise in food prices. It still remains above the central bank’s target of 4%, but has stayed within its tolerance range of 2%-6% for the fifth consecutive month.

Meanwhile, India’s goods trade deficit narrowed by almost 12% in January as compared with the month before, as imports fell more steeply than exports.

Merchandise trade deficit narrowed to $17.49 billion in January from $19.80 billion in December largely because imports declined to $54.41 billion against the $58.25 billion recorded in December,

Goods exports fell marginally to $36.92 billion in January from $38.45 billion in December mainly due to the armed conflict in the crucial Red Sea trading route.

The survey, however, noted that the overall level of business confidence in February had slipped from January’s four-month high, but remained indicative of a robust degree of optimism towards growth prospects.

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ABOUT THE AUTHOR
Rhik Kundu
Rhik writes about the Indian economy and its crucial indicators. He is constantly navigating corporates, decoding policies, and dabbling with everything in between.
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Published: 22 Feb 2024, 01:27 PM IST
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