April business expanded in 14 years
With a pick-up in sales growth, private-sector company activity expanded faster in April than it did in March, indicating a strong start to the new fiscal year for the Indian economy.
According to a survey released by HSBC on Tuesday, the output index of the HSBC Flash India Composite Purchasing Managers' Index (PMI) by S&P Global increased at the quickest rate of growth in overall business activity since June 2010. The index increased from a revised reading of 61.8 in March to 62.2 in April. A PMI number of 50 or higher denotes growth over the prior month; a value of 50 or lower denotes contraction.
Based on a poll of 400 manufacturers and 400 service providers, the seasonally adjusted index calculates the monthly change in the total output of India's manufacturing and service sectors.
"Survey participants overwhelmingly attributed the expansion to buoyant demand from domestic and external clients," stated HSBC. The study also found that although growth in both the manufacturing and service sectors was broadly based, the manufacturing sector experienced a little uptick in April compared to March, and the service economy reached a three-month high in company activity during the current month.
The information highlights India's status as one of the main economies with the quickest rate of growth. The government's second advanced estimate indicates that the economy will grow by 7.6% in FY24, up from 7.3% in FY23, and the Reserve Bank of India (RBI) anticipates that the economy will grow by 7% in FY25.
The manufacturing and service sectors demonstrated strong performance, driven by a rise in new orders, which led to the highest composite production index since June 2010. According to Pranjul Bhandari, chief India economist at HSBC, "in particular, services growth accelerated further in April as new orders in both domestic and international markets rose."
"In the meantime, although they continued to be strong, composite input and output prices decreased in April. Strong demand circumstances allowed businesses to pass on higher pricing to clients, which resulted in an improvement in manufacturing profits in April, Bhandari continued.
According to earlier figures, the Indian economy expanded by a healthy 8.4% in the third quarter thanks to higher government spending and successful results in the manufacturing, mining, construction, and services sectors.
"International sales made a positive contribution to overall order books, following the recent trend. Actually, since the series began in September 2014, new export orders have increased at the quickest rate at the composite level, according to the poll.
Services companies observed a faster pace of expansion on this front. Stronger sales to customers in Africa, Asia, Australia, the Americas, Europe, and the Middle East were indicated by anecdotal evidence, it continued.
After revisions in March, the Flash Services PMI Business Activity Index was revised to 61.7 for April; the Flash Manufacturing PMI Output Index was revised to 63.2 for April, slightly less than the revised figure of 63.3 for March; and the Flash India Manufacturing PMI was revised to 59.1 for April, which was identical to the revised figure for March.
Retail inflation based on the consumer price index (CPI) dropped below 5% in March for the first time since November 2023, with a reading of 4.85%. Although retail inflation is still above the Reserve Bank of India's 4% target, it has now sustained itself for seven months in the 2-6% tolerance range.
In the meantime, industrial output increased 5.7% in February following an eight-month low of 2.5% in November. It had previously grown 4.14% in January and 4.3% in December.
"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 survey conducted by HSBC stated.
Participants in the study stated that increased demand made it easier to pass on growing costs to customers. A slower growth in services companies was in contrast to a more robust rise in the manufacturing sector," it continued.
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