India's business activity accelerated at its fastest pace in three months in July, driven by strong demand, particularly in the services sector. A recent survey revealed that companies hired at the fastest pace in over 18 years, reflecting sustained growth in the private sector. This growth aligns with the government's first budget since the national election, which includes incentives to improve skills and spur employment. HSBC's flash India Composite Purchasing Managers' Index, compiled by S&P Global, increased to 61.4 this month from June's final reading of 60.9, indicating three years of continuous expansion. "The Flash Composite Output Index signalled continued robust growth in India's private sector," noted Pranjul Bhandari, chief India economist at HSBC. In July, manufacturing sector business activity increased, driving the rise in output. Services output also accelerated, remaining significantly above its long-run average, Bhandari added. The services industry led the expansion, with its PMI rising to 61.1, the highest in four months. Manufacturing also saw strong growth, with a PMI of 58.5, the highest since April. Favorable market conditions, strong client demand, and improved technology boosted private sector activity. New business in services and manufacturing orders stayed strong. Job creation increased at the fastest rate since April 2006, boosting overall business confidence at the beginning of this quarter. Business confidence, which had declined to a seven-month low in June, rebounded in July as companies became more optimistic, according to Bhandari. "We note that the rate of input cost inflation continued to trend higher in both sectors, which has driven firms to keep raising sales prices." Prices charged increased sharply, reaching the highest level in over 11 years. Strong demand enabled companies to transfer the increased costs of materials, transportation, and labour to customers. The rise in prices may impact the Reserve Bank of India's (RBI) interest rate strategy, aimed at bringing inflation back to its four per cent target. The central bank is anticipated to lower its key policy rate in the next quarter. Attribution: Reuters Download
