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India’s business activity continued its strong growth trajectory in August, driven by a resilient services sector that offset a minor deceleration in manufacturing, according to a recent survey.
The findings also indicate a reduction in price pressures, suggesting the economy is on track to maintain its status as the fastest-growing major economy despite a challenging global environment.
Slight Dip in Growth, but Momentum Remains Strong
HSBC’s flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, recorded a slight decline to 60.5 in August from July’s 60.7, aligning with forecasts from a Reuters poll.
Despite the marginal drop, August marked over three years of continuous expansion, the longest such streak since June 2013. The 50-point mark on the PMI scale distinguishes growth from contraction.
“India’s flash composite PMI slipped slightly in August, though it remained significantly higher than the historical average,” said Pranjul Bhandari, chief India economist at HSBC. This suggests that the underlying growth momentum remains robust.
Services Sector Leads, Manufacturing Slows
The flash services PMI rose marginally to 60.4 in August, up from 60.3 in July, signaling strong growth in the sector. In contrast, the preliminary manufacturing PMI showed a slight decline, falling to 57.9 from 58.1 in July.
While new order growth in manufacturing hit its lowest point since February, it still reflected strong demand and favorable market conditions.
Demand and Inflation Trends
Overall demand growth, while slowing to a three-month low, remained strong in August. However, exports expanded at their slowest rate since April, highlighting weak global demand. Input costs saw their weakest increase since February, and output prices rose at a slower pace compared to July.
Despite this, prices for manufactured goods surged at the fastest rate in nearly 11 years.
Inflation Concerns and Business Confidence
India’s retail inflation dropped to a near five-year low in July, driven by a high-base effect. However, this slowdown in price rises is expected to be temporary, suggesting that the Reserve Bank of India may need to proceed with caution.
Concerns over inflation and competition contributed to a decline in business confidence for the coming year in August.
