Indian Economy Poised for Steady Growth Amid Price Easing

New Delhi: With easing in price pressures, the fastest growing major economy is expected to continue to grow at a steady pace over the coming years, as Indian business activity expanded at its fastest pace in seven months in February due to strong demand for both manufacturing and services. Though employment didn't increase for the first time since May 2022, the latest figure was consistent with a sharp rate of expansion that was the strongest since mid-2023, a private survey showed on Thursday.

According to the survey by HSBC's flash India Composite Purchasing Managers' Index (PMI), compiled by S&P Global, the index rose to 61.5 in the month of February from January's final reading of 61.2, staying above the 50-mark that separates expansion from contraction for a 31st straight month. India’s manufacturing PMI for the month of February came in at 56.7 as compared to 56.5 in the previous month, up from December’s 18-month low of 54.9, while services PMI rose to 62 from 61.8 on month-on-month (MoM) basis and composite PMI was at 61.5 vs 61.2 on MoM.

Commenting the survey, Pranjul Bhandari, Chief India Economist at HSBC, said that the pace of acceleration in the output of India’s manufacturers and service providers, combined, was at

a 7-month high in February. "Encouragingly, new export orders rose sharply, particularly for goods producers. Input prices rose at the slowest pace in three-and-ahalf-years. Producers were able to do both – lower the rate of increase in output prices and improve margins.”

The survey also noted that new orders across the private sector continued to rise at a robust pace driven by demand in the dominant services industry, which expanded at the fastest pace since mid-2010. Factory output accelerated to a five-month high. "Overall international orders increased at the quickest pace since September. That bolstered the view for the coming 12 months with optimism among manufacturers at the highest since December 2022. However, overall business confidence slipped from January's four-month high," it showed.

"Although services companies noted a stronger increase in cost burdens than manufacturers, the flash data showed a moderation in cost pressures. Overall input prices rose at the weakest pace in 3 & 1/2 years. Although outstanding business volumes continued to increase halfway through the final fiscal quarter, the pace of accumulation was slight and softer than in January. Rates of expansion were equal at goods producers and service providers," it showed.

On job front, survey noted that

despite ongoing growth of new orders, private sector companies in India refrained from recruiting extra workers during February. "Payroll numbers were unchanged since January, thereby ending a 20-month sequence of job creation. Anecdotal evidence suggested that workforces were sufficient for current requirements," the survey said.