Surge in new business gains and better performance of exports helped private sector to perform better, a flash survey result released on Friday showed. However, inflation pressure is intensifying
“The HSBC Flash India Composite Output Index rose from a final reading of 59.1 in October to 59.5 in November, indicating a sharp rate of expansion that was the strongest in three months and above its long-run average,” S&P Global said.
This index combines performance in manufacturing and service sector and based on survey conducted among 400 manufacturing and 400 service providers. Based in response a seasonally adjusted index is prepared that measures the month-on-month change in the combined output of India’s manufacturing and service sectors.
“Growth ticked lower in the manufacturing industry whilst picking up in services, although the former outperformed again,” the survey result showed. While flash Services PMI (Purchasing Manager Index) rose to 59.2 in November as against 58.5 of October, Manufacturing PMI was 57.3 as against 57.5.
“Strong end-demand and improving business conditions pushed services sector employment to the highest level ever recorded by this indicator since December 2005. Meanwhile, price pressures are rising for raw materials used by manufacturers, as well as food and wage costs in the services,” Pranjul Bhandari, Chief India Economist at HSBC, said. Service sector has a share of over 50 per cent in GVA (Gross Value Added), while manufacturing has a share of over 15 per cent.
Ongoing improvements in new business intakes continued to exert pressure on the capacity of private sector companies, as signalled by another uptick in backlogs. The expansion in outstanding business volumes was moderate, but nevertheless the quickest since May. In turn, firms pursued further recruitment drives in November. The rate of job creation accelerated to the steepest since composite data became available in December 2005, driven by rising workforce numbers across the service economy.
Cost pressures across India’s private sector intensified in November, reaching their highest since August 2023. Manufacturers commented on price hikes for a range of raw materials, including aluminium, cotton, leather and rubber. Service providers particularly remarked on greater food costs (cooking oils, eggs, meat and vegetables) and wage bills.
“In response to rising operating costs, private sector companies in India hiked their selling charges again during November,” the survey report said. Further, it added that the rate of inflation was sharp and the fastest in just under 12 years. Firms suggested that demand strength allowed them to pass on additional cost burdens to their clients. Although service providers noted a stronger increase in cost burdens than manufacturers, rates of charge inflation were broadly similar across the two sectors and both saw an acceleration since October, the report added.