India’s business activity surged in April to its highest level in nearly 14 years in a noteworthy development, propelled by high demand across various sectors. The latest Purchasing Managers’ Index (PMI) data, compiled by S&P Global and HSBC, released on Tuesday, highlights India’s consistent position as the fastest-growing major economy.
Composite PMI
The Flash India Composite PMI, which measures the combined output of India’s manufacturing and service sectors, climbed to 62.2 in April, up from March’s final reading of 61.8. This expansion marked the 33rd consecutive month of growth.
Sector-Wise Performance
Pranjul Bhandari, Chief India Economist at HSBC, attributed the healthy performance across manufacturing and services to increased new orders. The highest composite output index since June 2010, mentioned Bhandari, portrays the strength of India’s economic momentum.
The services sector led the expansion, with the Business Activity Index reaching a three-month high at 61.7, driven by accelerated new business intakes. Meanwhile, manufacturing remained strong with both output and new orders maintaining a sturdy pace of growth.
Rising Demand and Employment
International demand played a key role in boosting India’s business scene. Exports grew at their fastest pace since the survey began including them in September 2014. Strong sales, particularly in markets across Africa, Asia, Australia, Europe and the Americas, further benefited India’s economic prospects.
Rising demand translated into job growth, particularly in the manufacturing sector, where employment increased at the fastest pace in one-and-a-half years. However, employment generation in the services sector slowed down since March.
India’s Monetary Policy
Input cost inflation eased for both sectors. However, strong demand allowed businesses to pass on these expenses to customers, leading to improved manufacturing margins. Inflationary pressures do persist, however; the RBI may maintain its cautious stance on monetary policy. Price rises are likely to stay above the central bank’s 4% medium-term target for longer.
Upcoming Releases
The final manufacturing PMI headline figure for April will be released on 2 May, followed by the services and composite PMI on 6 May.
