India’s private sector witnessed an unprecedented acceleration in August, with HSBC’s Flash PMI data pointing to the sharpest upturn since the survey began in December 2005. The HSBC Flash India Composite Output Index jumped to 65.2, up from 61.1 in July, signalling a record pace of expansion in overall business activity. The pick-up was underpinned by surging demand, as new orders grew at one of the quickest rates on record.
The Flash PMI data serves as an early gauge of how the economy may have performed in August, offering a snapshot before the final indices are published.
Services Outpace Manufacturing
Sub-sector readings highlighted that the services economy was the standout performer. The HSBC Flash India Services PMI Business Activity Index surged to 65.6 in August, compared with 60.5 in July, marking a fresh survey high. Firms reported robust gains in sales volumes, which encouraged more hiring and lifted optimism for the year ahead to its strongest level since March.
The manufacturing sector, while still showing improvement, grew at a steadier pace. The HSBC Flash India Manufacturing PMI Output Index rose to 64.2 from 62.5 in July, and the broader Manufacturing PMI ticked up to 59.8, its highest since January 2008. This suggested operating conditions improved further, though the expansion remained more moderate than the services sector.
Pranjul Bhandari, Chief India Economist at HSBC, said, “The Services flash PMI touched an all-time high of 65.6, led by a sharp pick up in new business orders, both export and domestic. The Manufacturing flash PMI rose further, inching closer to the 60-mark, led by a smart rise in new domestic orders. Growth of new export orders, however, remained unchanged at July’s levels. Margins improved as the rise in output prices was much faster than that for input costs.”
Rising Demand and Export Boost
Both goods producers and service providers benefited from strong demand conditions in August. New orders surged across the board, supported not only by domestic clients but also by a sharp rise in overseas demand. Export business expanded at the fastest rate since composite data collection began in 2014, with firms citing increased workloads from Asia, Europe, the Middle East and the US.
Employment Growth and Pricing Pressures
The sustained rise in activity translated into continued job creation. Private sector firms increased hiring for the fifteenth consecutive month, with the pace of employment growth quickening in services, offsetting a slight slowdown among manufacturers. This expansion in workforce capacity helped prevent major backlogs, with unfinished business rising only marginally.
However, firms also reported intensifying cost pressures. Input costs rose markedly in August, driven by higher wage bills in services and elevated raw material prices in manufacturing. In response, output charges were raised to the sharpest extent since February 2013, with many businesses citing resilient demand as justification for passing costs on to customers.
Outlook Strengthens
Looking ahead, optimism about business activity strengthened across both sectors. Expectations for the next 12 months reached their highest since March, supported by strong demand projections and continued confidence in domestic and export markets.
The latest Flash PMI readings suggest that while manufacturing momentum continues, it is the services sector that is powering India’s private sector expansion in August, setting the stage for a buoyant performance when the final PMI figures are released.
