India’s Business Activity Growth Continues

By Indradip Ghosh

BENGALURU (Reuters) – India’s business activity extended its robust growth streak in August as a stronger services industry offset a slight slowing in manufacturing expansion, according to a survey that indicated price pressures were also easing.

Those findings suggest India will retain its status as the fastest-growing major economy in the coming quarters, despite expectations of a slowdown in the global economy.

HSBC’s flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, dipped slightly to 60.5 in July from last month’s final reading of 60.7, in line with a Reuters poll forecast.

August marked over three years of expansion, the longest such run since June 2013. The 50-level separates growth from contraction.

“India’s flash composite PMI slipped slightly in August, though it remained significantly higher than the historical average,” noted Pranjul Bhandari, chief India economist at HSBC.

“Although new order growth for the manufacturing sector slowed to the weakest since February, the pace of expansion remained sharp, indicating continued strong demand and favourable market conditions.”

The flash services PMI index rose to 60.4 this month from 60.3 in July, while a preliminary manufacturing PMI showed strong growth, albeit slightly weaker than last month, declining to 57.9 from 58.1.

Although growth in overall demand slowed to a three-month low in August, it remained robust. However, exports expanded at the slowest rate since April, indicating weak global demand.

Overall input costs increased at their weakest pace since February, and output prices rose at a slower rate compared to last month.

Even so, prices charged on manufactured goods surged at the fastest rate in nearly 11 years.

India’s retail inflation fell in July to a near five-year low, largely due to a high-base effect, suggesting the slower pace of price rises was temporary and that the Reserve Bank of India needs to be cautious.

Concerns around inflation and competition led to waning business confidence for the coming 12 months in August.