After losing some momentum in March due to the West Asia conflict, growth across India’s private sector expanded at a faster pace at the start of the new fiscal year in April. Early survey data indicated a quicker upturn for manufacturers than service providers, although growth picked up pace in both cases.
There were quicker increases in new orders and output, alongside the reinstatement of job creation and a rebound in business confidence in April, according to HSBC’s Flash India Purchasing Managers’ Index (PMI) released on Thursday.
The flash survey, an advance estimate ahead of final PMI readings, offers an early indication of shifts in economic sentiment and output. The final data for April will be released early next month.
The HSBC Flash India Composite PMI Output Index, compiled by S&P Global and measuring both the manufacturing and the service sectors, rose to 58.3 in April from a final reading of 57.0 in March, signalling an uptick in overall private sector growth. The reading remains comfortably above the 50-point threshold that separates expansion from contraction.
The HSBC Flash India Manufacturing PMI Output Index advanced to 59.1 in April from 55.7 in March, signalling improved momentum in factory production.
The HSBC Flash India Services PMI Business Activity Index climbed to 57.9 in April from 57.5 in March, reflecting steady demand and healthy business confidence.
The broader HSBC Flash India Manufacturing PMI rose 55.9 in April from 53.9 in March, signalling the best improvement in operating conditions since last October.
Manufacturing-led resurgence
“Aggregate activity and new orders in expanded at quicker rates at the start of this fiscal year, after growth receded in March due to the Middle East war. Inflation rates remained historically elevated but retreated from those registered last month due to a cooldown in the service sector. Manufacturing led the resurgence with notable rebounds in rates of increase for output and sales, but price pressures intensified here,” the survey said.
The survey participants indicated that business activity was supported by capacity expansion, better demand conditions, rising intakes of new work and tech investment.
New orders rose at a quicker pace than in March and one that was historically strong. Trends for exports were mixed at the sector level as a slowdown in growth at service providers contrasted with a quicker increase among goods producers. The latter posted the fastest expansion in nine months, while services firms recorded the weakest uptick in just over a year, reportedly due to , the survey said.
At the composite level, new export business rose at a softer rate than in March.
“Private sector activity accelerated after easing in March amid disruptions linked to the Middle East conflict. Manufacturing led the upturn, with faster growth in output and new orders,” said Pranjul Bhandari, chief India economist at HSBC. “The survey indicated that firms are building buffer stocks to manage the uncertainties around the longevity of the supply-side shock. Finished goods and input inventories increased alongside a pick-up in purchasing volumes. Input cost pressures remained elevated, and firms passed through part of the increase via higher selling prices.”
Cost pressures
According to the survey, private sector companies in India continued to report elevated cost pressures in April, which they attributed to rising fuel, gas, oil and raw material prices. Although below that seen in March, the overall rate of input cost inflation was the second-steepest in almost three years, the survey noted.
In response to rising cost burdens, Indian companies lifted their selling prices at the start of the first fiscal quarter. Although marked and above its trend, the rate of output charge inflation was well below that seen for input costs.
For both measures of , acceleration in manufacturing contrasted with slowdowns in the service economy, HSBC’s Flash India PMI said.
Jobs across India’s private sector increased further, with the rate of job creation reaching a 10-month high in April. Qualitative evidence from the survey showed that growth was fuelled by rising business requirements, expansion plans and upbeat year-ahead forecasts. Hiring growth strengthened at manufacturing companies and their services counterparts, with the quicker upturn among the former, said the survey.
According to the survey, Indian companies foresee an increase in output over the coming 12 months. Marketing efforts should support demand for goods and services, with projects pending approval and rising client enquiries also boosting optimism. The overall level of confidence fell since March, but was the second-highest in about a year-and-a-half, the survey noted.
The Flash PMI data is based on responses from about 400 manufacturers and 400 service providers.