India’s April business growth at near 14-year high, PMIs show

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s business activity expanded at its fastest pace in nearly 14 years this month thanks to robust demand, according to a survey released on Tuesday that also showed easing input inflation and positive jobs growth.

That suggests India is well placed to remain the fastest growing major economy this year after posting strong expansion over the past few quarters.

HSBC’s flash India Composite purchasing managers’ Index, compiled by S&P Global, rose to 62.2 this month from March’s final reading of 61.8.

The reading has been consistently above the 50-mark separating expansion from contraction since August 2021.

“Strong performance in both the manufacturing and service sectors, led by increased new orders, resulted in the highest composite output index since June 2010,” noted Pranjul Bhandari, chief India economist at HSBC.

The strong expansion was led by services activity, with the index rising to a three-month high at 61.7 from March’s 61.2, thanks to new business – a key gauge for demand – accelerating.

A manufacturing PMI held strong at March’s 59.1 this month. Both output and new orders for goods continued to grow at a robust pace, albeit slightly slower than last month.

Overall international demand was solid and the composite sub-index rose to the highest since it was added to the survey in September 2014.

Strong sales improved the business outlook for the coming 12 months from a four-month low in March.

Efforts to meet rising demand supported jobs growth, which was the most pronounced in manufacturing where it increased at the fastest pace in one-and-a-half years.

However, employment generation among services firms was slower than in March.

Meanwhile, input costs cooled for both goods producers and their services counterparts but demand strength enabled passing on expenses to customers.

A stronger increase in output costs among manufacturing firms contrasted with a slower rise in the services industry.

“Manufacturing margins improved in April as firms were able to pass on higher prices to customers due to strong demand conditions,” added Bhandari.

That means inflation may not fall fast enough for the Reserve Bank of India to start considering rate cuts any time soon as price rises were likely to stay above the central bank’s 4% medium term target for longer.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow