India’s private sector activity reported growth in February, with the HSBC Flash India PMI Composite Output Index rising to 59.3 from 58.4 in January, marking the strongest rate of expansion in three months.
The survey showed that the private-sector growth was led by robust demand for goods, even as services growth remained broadly steady.
The growth was supported by robust total new orders, which rose at the quickest pace since November. Businesses attributed gains to strong demand, local tourism and marketing efforts. International sales also increased at the fastest pace in five months, bolstering overall demand.
At the same time, the expansion was accompanied by rising inflationary pressures, as both input costs and selling prices rose faster. Service providers registered a faster increase in output charges compared to manufacturers, reflecting stronger cost pressures in the services sector.
Manufacturing growth
Goods producers reported a sharper rise in sales, pushing output growth to a four-month high. Services firms, however, saw growth in new business ease to a 13-month low, even as they outperformed manufacturers on export orders.
While the preliminary headline reading for manufacturing PMI rose to 57.5 from 55.4, the services PMI was little changed at 58.4, versus 58.5 in January.
Better sales supported hiring at a faster pace, and optimism about year-ahead activity improved to its strongest in a year. In the survey, Businesses also expressed improved optimism toward growth prospects, reflecting confidence in sustained economic activity in the coming months.
Input costs rise
The survey also showed higher price pressures, with input costs rising at their fastest rate in 15 months and pushing overall output charge inflation to a six-month high. Services firms faced the steepest rise in input price inflation in two-and-a-half years, while factory input price inflation remained unchanged from January.
That combination of solid growth and rising costs, especially for services, will keep the Reserve Bank of India cautious, as retail inflation rose 2.75 per cent last month after the statistics ministry updated the consumer price index basket and base year to 2024.