India’s Business Activity Hits 3-Month High in November

India’s business activity surged to a three-month high in November, reaching a strong reading of 59.5, despite growing cost pressures. According to the HSBC Flash India Composite Purchasing Managers Index (PMI), compiled by S&P Global, the output index rose from 59.1 in October, remaining above the long-term average.

The composite index, which combines manufacturing and services PMI data, showed a faster expansion in manufacturing new orders and output compared to services. However, it was in the services sector where job creation was most prominent. While manufacturing growth slowed slightly, services sector activity saw a notable uptick, contributing to the overall economic strength.

The HSBC Flash India Manufacturing PMI stood at 57.3 in November, marginally down from 57.5 in October, but still indicating significant improvement in the sector's health. New orders in manufacturing continued to rise, with demand driving the sector’s growth. The manufacturing expansion rate was the fastest since August, despite a slight dip from October’s levels.

"Services saw a pick-up in growth, while the manufacturing sector managed to outperform expectations despite a marginal slowdown. Strong end-demand and improving business conditions led to a record high in services sector employment, the highest level since December 2005,” said Pranjul Bhandari, Chief India Economist at HSBC.

However, cost pressures across India’s private sector intensified in November, reaching their highest point since August 2023. Manufacturers reported higher prices for various raw materials, including aluminium, cotton, leather, and rubber. Service providers, particularly in the food industry, faced increased costs for essential ingredients like cooking oils, eggs, meat, and vegetables, in addition to rising wage bills.

While service providers faced a more significant increase in cost burdens than manufacturers, both sectors experienced a rise in inflationary pressures. This led to an acceleration in both the manufacturing and services sectors' rates of charge inflation compared to October.

Overall, the data reflects a robust business environment in India, driven by strong demand in both manufacturing and services, even as rising costs continue to challenge businesses across the country.