HSBC’s flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 58.3 in April from 57.0 in March, staying well above the 50-mark that separates expansion from contraction for nearly five years, a Reuters report showed.
The uptick was led by manufacturing, where the PMI climbed to 55.9 from 53.9, while the output index jumped to 59.1 from 55.7. Services activity also strengthened, though at a more modest pace, with the business activity index inching up to 57.9 from 57.5.
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The rebound points to resilient domestic demand at the start of the new fiscal year, even as businesses navigate supply disruptions and higher input costs triggered by the ongoing war in the Middle East.
“Overall, the data indicates a healthy pace of growth in manufacturing, though its sustainability will depend on demand consistency and cost control in the coming months,” said Santosh Meena, Head of Research at Swastika Investmart.
“At the same time, rising input costs, especially from commodities or energy, remain an important factor to watch. Even with stronger output, higher expenses could affect profit margins if not managed efficiently,” Meena of Swastika Investmart added.Meanwhile, Pranjul Bhandari, chief India economist at HSBC told Bloomberg, as per a repor that “the survey indicated that firms are building buffer stocks to manage the uncertainties around the longevity of the supply-side shock.” He added that manufacturing led the upturn with faster growth in output and new orders.
Companies reported stronger demand overall, with new orders rising at a faster pace and remaining historically robust.
EXPORT TRENDS
Export trends, however, were mixed with manufacturers witnessing the fastest growth in overseas orders in nine months, while services firms recorded the weakest increase in over a year, which respondents linked to the Middle East conflict.
The war has disrupted energy flows through the Gulf, with supplies effectively choked via the Strait of Hormuz, pushing up fuel and raw material costs. India, one of the world’s largest importers of liquefied petroleum gas (LPG), has faced shortages, prompting the government to prioritise household supply over industrial use — a move that could weigh on some businesses.
Input cost inflation, while easing from March, remained elevated and among the highest levels seen in nearly three years. Firms continued to pass on some of these costs, though output price increases lagged behind input price pressures.
Despite the external headwinds, business activity was supported by capacity expansion, improved demand conditions and investments in technology, according to the survey.
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However, overall business confidence slipped from the previous month, reflecting uncertainty over the duration of the conflict and its impact on energy supplies. At the same time, employment rose at the fastest pace in 10 months, indicating firms remain optimistic enough to expand their workforce.
The data comes as policymakers and investors assess the economic fallout of the conflict. The International Monetary Fund has pegged India’s growth at 6.5% but warned that inflationary risks could weigh on the economy if energy prices remain elevated.
While a ceasefire between the US and Iran has been extended, uncertainty over global energy supplies persists, keeping risks to growth and inflation finely balanced even as India’s domestic demand shows signs of resilience.
(With inputs from Reuters and Bloomberg)