Overview of Business Activity

BENGALURU (Reuters) – India’s business activity picked up slightly in October, driven by stronger demand in the manufacturing sector. A recent survey highlighted the fastest job creation since February 2006.

Purchasing Managers’ Index (PMI) Update

HSBC’s flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 58.6 in October, up from 58.3 in September, which was a 10-month low. The index has remained above the 50 mark, indicating growth, for 39 consecutive months – the longest expansion streak since June 2013.

Manufacturing Sector Performance

“India’s manufacturing sector regained growth momentum in October after a moderate slowdown over the last two to three months,” said Pranjul Bhandari, chief India economist at HSBC. “New orders, including export orders, grew at faster rates, indicating a positive outlook for industrial production in the remaining months of 2024.”

The manufacturing PMI increased to 57.4 in October, up from 56.5 in September, while the services sector PMI rose slightly to 57.9 from 57.7. Goods production also saw its fastest growth in two months.

Government Initiatives and Investments

This boost comes as positive news for India’s manufacturing sector, which makes up less than one-fifth of the country’s economy. Prime Minister Narendra Modi’s government has been pushing for increased production, with a production-linked incentive (PLI) scheme attracting over $17 billion in investment, leading to production worth ₹11 trillion ($131 billion) and nearly one million jobs.

International Demand and Job Creation

The survey also reported increased international demand in October, leading to a faster rise in exports. This surge in demand prompted businesses to hire more staff, with employment growth reaching its highest level in nearly 18-and-a-half years. Job creation in the services sector outpaced that in manufacturing.

Impact of Rising Input Costs

Rising demand allowed firms to pass on higher input costs to customers, with prices rising at the steepest rate in three months. Companies reported increased costs for chemicals, meat, packaging, steel, and vegetables.

Conclusion

However, profit margins remain under pressure due to rising input costs, according to Bhandari. While manufacturers showed the most optimism since July, the business outlook for the services sector was somewhat less positive.