India’s business activity witnessed a remarkable upsurge this April, marking its fastest pace of expansion in nearly 14 years. Bolstered by robust demand, the nation’s business activity soared, offering a promising outlook for its economic trajectory. A recent survey unveiled insights into this unprecedented growth, revealing encouraging trends in input inflation easing and job creation.
The latest data underscores India’s robust position as one of the fastest-growing major economies, building on a foundation of strong expansion observed over the past few quarters. According to HSBC’s flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, the index surged to 62.2 this month from March’s final reading of 61.8, maintaining a consistent expansion streak since August 2021.
Services activity spearheaded this remarkable expansion, with the index reaching a three-month high at 61.7, fueled by accelerated new business inflows. Similarly, the manufacturing PMI held strong at 59.1 this month, sustaining growth in output and new orders, albeit at a slightly slower pace than the previous month.
The composite sub-index, reflecting overall international demand, reached its highest level since its inclusion in the survey in September 2014, indicating solid global demand. Strong sales further brightened the business outlook for the coming 12 months, rebounding from a four-month low in March.
Efforts to meet the escalating demand spurred job growth, particularly evident in the manufacturing sector, where employment surged at the fastest pace in one-and-a-half years. However, employment generation among services firms lagged behind March’s figures.
Despite cooling input costs for both goods producers and service providers, robust demand dynamics empowered firms to pass on expenses to customers. Notably, manufacturing margins saw improvement in April as firms capitalized on strong demand conditions to adjust prices.
However, a nuanced picture of inflationary pressures emerged, with a stronger increase in output costs among manufacturing firms compared to a slower rise in the services industry. This suggests that inflation may not recede rapidly enough for the Reserve Bank of India to consider rate cuts anytime soon, as price rises are expected to persist above the central bank’s 4% medium-term target for an extended period.
