According to an ET report, the HSBC Flash India Composite Output Index climbed to 61.7 in May from 61.5 in the previous month, driven by strengthening export demand and an accelerating services sector.
Pranjul Bhandari, chief India economist at HSBC, noted, “The latest data showed strength in new export orders for both sectors, which rose at the fastest pace since the series started in September 2014.”
On Growth Path
Although manufacturing sector activity slightly moderated to 58.4 in May from 58.8 in the previous month, marking the slowest pace since February, it remained above the long-term average.
Conversely, the services sector expanded at its quickest rate in four months. The Flash PMI captures responses from 80% of the 800 firms surveyed across the manufacturing and services industries, with final numbers set to be released in the first week of June.
According to an ET poll, the services sector is expected to have contributed to growth in the fourth quarter of FY24. The latest poll projected Q4FY24 growth at 6.8%, with FY24 growth at 7.8%. The median of 16 forecasts in the ET Poll for FY25 was 6.8%, aligning with IMF estimates.
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The survey also highlighted increased optimism about the future, with the future output index rising by nearly seven points in May. Bhandari stated, “The level of optimism about the year ahead increased to its highest in over 11 years, resulting in firms increasing their staffing levels.”
While employment growth has been inconsistent since last year, May showed signs of improvement. The report further noted, “Another factor that supported growth of headcount was an intensification of capacity pressures. Combined across the manufacturing and service sectors, outstanding business volumes rose to the greatest extent in 21 months.”