Manufacturing and services sectors regain momentum in June, HSBC survey shows

Indian businesses in both the manufacturing and services sectors, which saw growth softening in May, regained their momentum in June with business activity picking up at a quicker pace, HSBC India flash survey released on Friday showed.

There was a substantial upturn in aggregate employment amid robust expansions in total new order intakes and international sales as price pressures receded, stated the HSBC Flash India PMI survey report, compiled by S&P Global.

The services purchasing managers’ index (PMI) climbed to 60.4 in June 2024 from 60.2 in May, while the manufacturing purchasing managers’ index increased to 58.5 in June from 57.5 in the previous month.

The flash PMI survey is a precursor to the manufacturing and services PMI reading, which is released in the first week of every month.

The PMI is an economic indicator derived from the monthly survey of private sector companies.

On the march again

India’s manufacturing activity had slipped to a three-month low of 57.5 in May, as intense heatwaves led to reduced working hours and impacted volumes.

Meanwhile, services sector growth had softened to a five-month low in May following stiff competition and price pressures amid a severe heatwave.

The composite PMI output index, which is seasonally adjusted and measures the month-on-month change in the combined output of India's manufacturing and service sectors, rose to 60.9 in June from 60.5 in May, indicating continued expansion.

Meanwhile, the Manufacturing PMI Output Index rose to 62.1 in the month, from 61.1 in the previous month, according to the flash survey.

Also Read: India’s service PMI eases to five-month low in May

This index is based on a survey of 400 manufacturers and 400 service providers. A reading above 50 shows an expansion in economic activity, and a data print below that signals contraction. 

The composite PMI has now remained above 50 for 35 consecutive months.

The final data will be released next month. 

"The composite flash PMI ticked up in June, supported by rises in both the manufacturing and service sectors, with the former recording a faster pace of growth. New orders gained growth momentum for both sectors, with a faster upturn among manufacturers. Meanwhile, new export orders slowed slightly in June, although the rate of expansion was the second fastest since the beginning of the series," said Maitreyi Das, Global Economist at HSBC.

"The output price index suggests manufacturing firms were able to pass on higher costs to customers. Overall, optimism about future output weakened in June, but remained above the historical average," Das added.

The $10-trillion target

India aims to grow into a $10 trillion economy over the next decade, on the back of growth in the manufacturing sector.

The push for manufacturing growth is expected in sunrise sectors such as semiconductors, electronics manufacturing, the electric vehicles ecosystem, renewable energy, and defence, among others. 

To that extent, the central government has stepped up its capital expenditure budget in recent years to improve the country’s creaking infrastructure, create jobs, and push manufacturing to accelerate economic growth. 

Also Read: Retail inflation eases, factory output ticks higher in May, boosting Indian economy

The government has also announced production-linked incentive (PLI) schemes across 14 key sectors in 2020 with an outlay of  ₹1.97 trillion (over $26 billion) for five years starting from FY2021-22, to enhance the country's manufacturing capabilities. 

Meanwhile, India's services sector—among the world's fastest-growing—accounts for more than half of the country's gross domestic product.