Business activity in March grew at its fastest pace in eight months, HSBC survey shows

New Delhi: India's private-sector business activity will end the fiscal year on a high, expanding at its fastest rate in eight months amid a pick-up in growth and buoyant demand, according to a survey released on Thursday.

The HSBC Flash India Composite Purchasing Managers’ Index (PMI) Output Index, compiled by S&P Global, climbed to 61.3 in March from a revised reading of 60.6 for February, well above the 50-point threshold that differentiates expansion from contraction. The seasonally adjusted index measures the month-on-month change in the combined output of India’s manufacturing and service sectors.

While the manufacturing industry led the upturn with the fastest expansion in factory orders and production in nearly three-and-a-half years, service providers also noted a sharp increase in business activity, broadly similar to February. Respondents to the survey attributed the upturn to efficiency gains and a robust consumer appetite, as well as investments in technology and favourable market conditions.

At 61.3 in March, the headline HSBC Flash India Composite PMI Output Index was inside growth territory for the 32nd month running, the survey said. Rising from 60.6 in February, the latest figure indicated a rate of expansion that was the highest since July 2023, it added. “The pace of growth was substantial and stronger than that recorded in February," the report said. Overall, the survey indicated a renewed improvement in business optimism during March, with economic conditions expected to remain conducive to growth.

The latest flash PMI numbers, based on a survey of 400 manufacturers and 400 service providers, come after data showed the Indian economy grew by a robust 8.4% in the third quarter. This growth was supported by increased government spending and a strong performance in manufacturing, mining and construction, apart from services.

Pranjul Bhandari, chief India economist at HSBC, said, “Led by the strongest manufacturing output in nearly three-and-a-half years, the composite output index rose quickly. New orders rose at a faster pace than in the previous month, and within that, both domestic and export orders showed improved vigour.” He added, “Input prices grew at a faster pace in March, and all the increase was not passed on to output prices, leading to some softening in composite margins.”

In December the Reserve Bank of India revised its growth forecast for the Indian economy to 7% for the current fiscal year, up from its earlier projection of 6.5%. This revision was due to higher-than-anticipated growth in the first two quarters of this financial year. The union government's estimate for GDP growth in FY24 stands at 7.6% on the back of better-than-expected growth during the first three quarters.

The Flash Services PMI Business Activity Index came in at 60.3 for March, down from 60.6 in February; the Flash Manufacturing PMI Output Index in March was 63.5, up from 60.7 in February; and the Flash India Manufacturing PMI stood at 59.2 in March, up from 56.9 in February.

Inflation in India remains within RBI’s tolerance level amid a moderation in exports and a fall in core-sector growth. In February, retail inflation fell to 5.09% from 5.1% in January owing to a rise in food prices. It still remains above the central bank’s target of 4% but has now remained within its tolerance range of 2-6% for the sixth consecutive month.

India’s merchandise trade deficit widened to $18.71 billion in February from $17.49 billion in January, as imports outstripped exports in value terms amid the Red Sea conflict. Goods imports rose to $60.11 billion in February from $54.41 billion in January, commerce ministry data showed, while exports came in at $41.40 billion in February, up from $36.92 billion in January.