India's Private Sector Business Activity Hits Four-Month High in October: HSBC PMI

The HSBC Flash India Composite Output Index rose to 56.7 in October from 55.9 in September, marking the strongest expansion since June. A reading above 50 indicates growth in business activity, while a figure below that threshold signals contraction.

Both manufacturing and services firms reported improved market conditions and an increase in new orders. Export demand also strengthened, with businesses recording their fastest growth in new export orders in six months.

Pranjul Bhandari, Chief India Economist at HSBC, said manufacturing output and overall new-order growth remained broadly stable compared with the previous month, while export orders registered a notable acceleration.

Responding to stronger demand, manufacturers increased their inventories of raw materials and finished goods. Meanwhile, inflationary pressures continued to ease, with businesses reporting slower increases in input costs and selling prices.

Employment Growth Loses Momentum

Despite the improvement in business activity, private-sector employment growth moderated during October. Services companies recorded no net increase in employment after nine consecutive months of workforce expansion.

Manufacturing firms continued to recruit workers, although the pace of job creation remained marginal. Several businesses indicated that their existing workforce was sufficient to manage current workloads, limiting the need for additional hiring.

The data also showed a decline in outstanding business, or backlogs of work, for the third time in four months. The rate at which backlogs were reduced was jointly the fastest in six and a half years, indicating that businesses were processing pending work more efficiently.

Manufacturing Continues to Expand

The HSBC Flash India Manufacturing Purchasing Managers' Index stood at 54.9 in October, signalling continued expansion in the manufacturing sector.

Overall, the latest figures point to sustained growth across India's private sector, supported by stronger demand and easing cost pressures. However, the slowdown in services-sector hiring suggests that the improvement in business activity has not translated into broad-based employment growth at the same pace.

The October figures are preliminary PMI estimates and provide an early indication of economic conditions before the final monthly data are released.