By Anant Chandak
BENGALURU (Reuters) – Growth in India’s business activity picked up slightly in October after softening last month, led by stronger demand in the manufacturing sector, according to a survey that also showed job creation rose at the fastest pace since February 2006.
HSBC’s flash India Composite Purchasing Managers’ Index, compiled by S&P Global, rose to 58.6 this month from September’s final reading of 58.3, which was a 10-month low.
The headline index has been above the 50-level separating growth from contraction for 39 consecutive months – the longest expansionary streak since June 2013.
“India’s flash manufacturing PMI indicated that the manufacturing industry regained growth momentum in October. Several components accelerated after a modest slowdown over the past two to three months,” noted Pranjul Bhandari, chief India economist at HSBC.
“New orders and new export orders expanded at faster rates, providing a good omen for industrial production for the remaining months of 2024.”
Backed by strong sales, the manufacturing index showed bigger gains to 57.4 from 56.5 in September, while the dominant services industry reading rose slightly to 57.9 this month from 57.7. Goods production growth was at a two-month high.
That’s encouraging news for India’s manufacturing sector which accounts for less than one-fifth of the economy. Prime Minister Narendra Modi’s government has been trying to boost goods production.
A government official recently said since the production-linked incentive scheme was launched, the country has attracted over $17 billion of investment, resulting in production worth about 11 trillion Indian rupees ($131 billion) and nearly a million jobs.
The survey also noted increased international demand in October with a faster rise in overall exports.
That prompted companies to hire more staff with overall employment generation rising at the fastest pace in around eighteen-and-a-half years. Job creation in the services sector was higher than manufacturing.
Robust demand gave firms the leeway to pass on an acceleration in input costs to customers with prices charged rising at the steepest pace in three months. Companies reported higher prices for chemicals, eggs, meat, packaging, steel and vegetables.
“Manufacturers’ profit margins are still under pressure as input price inflation continued to pick up pace,” Bhandari said.
The business outlook over the coming year was mixed with manufacturers at their most upbeat since July, while the sentiment faded somewhat for services companies, the survey showed.
($1 = 84.0450 Indian rupees)