India’s Business Activity Rebounds in September as Manufacturing, Services Gain

BENGALURU, Sept 23: India’s private sector business activity strengthened in September, with both manufacturing and services recording faster growth as domestic demand improved, according to preliminary purchasing managers’ survey data released on Wednesday.

The HSBC Flash India Composite Purchasing Managers’ Index rose to 56.5 in September from 54.3 in August, reaching its highest level since June. The reading also exceeded the Reuters poll median forecast of 54.4. A reading above 50 indicates expansion in business activity.

The improvement suggests that companies across major sectors continued to benefit from demand within the domestic economy. However, the latest figures also showed that the broader pace of economic expansion during the quarter remained weaker than in the previous three months.

The composite PMI averaged 55.1 during the September quarter, compared with 58.2 in April-June. The moderation comes after India recorded economic growth of 7.8% in the previous quarter, when investment and domestic demand provided strong support to overall activity.

Manufacturing recorded a particularly notable improvement. The manufacturing PMI increased to 55.7 from 52.8, marking its strongest reading in seven months. Factory output and new orders accelerated during the month, while goods producers also resumed hiring after reducing employment marginally in August.

The manufacturing improvement indicates that domestic demand remained supportive for producers despite uncertainty surrounding international trade and export markets. Companies were able to secure more orders, helping factory activity regain momentum during the month.

Services also expanded at a faster rate. The services PMI rose to 55.8 from 54.1, reflecting stronger activity in the sector. Services remain an important component of India’s economy and continue to account for a large share of business activity and employment.

However, the survey highlighted a weaker performance in overseas demand. New export business across the private sector grew at its slowest pace in 33 months. A modest improvement in manufacturing exports was not enough to offset the slowdown in services exports, resulting in weaker overall export growth.

The slower export performance is an important consideration for companies that depend on international markets. While domestic demand provided support, weaker foreign orders indicate that external conditions remain challenging for Indian businesses.

Employment trends were also mixed. Manufacturers returned to hiring, but employment growth in services lost momentum. This suggests that companies remained cautious about expanding their workforce despite stronger overall business activity.

Another positive development was the moderation in input cost pressures. Overall input cost inflation declined to its lowest level since January, mainly because of easing cost pressures in the services sector.

Lower input costs can provide companies with some relief by reducing pressure on operating expenses. However, businesses did not significantly reduce the prices charged to customers. Selling-price inflation remained broadly unchanged during September, indicating that lower input costs had not yet translated into substantial price reductions.

Business confidence also improved. Expectations for activity over the coming year rose to a four-month high, suggesting companies remained relatively optimistic about their future prospects despite slower export growth and a moderation in quarterly expansion.

The latest PMI figures also provide an early indication of economic conditions ahead of official data for the quarter. Because the survey covers both manufacturing and services companies, it is closely watched for signs of changes in demand, employment, prices and business sentiment.

The September figures show that India’s domestic economic engine continues to provide support to companies even as global conditions remain uncertain.

For manufacturers, stronger new orders and output point to improving operating conditions. For service providers, the increase in activity suggests domestic demand continues to offset some weakness in international business.

The data also comes as financial markets remain sensitive to global developments, including energy prices, currency movements and expectations about interest rates in major economies.

The Indian rupee ended weaker against the US dollar on September 23 as the dollar gained amid expectations of further US Federal Reserve rate increases. State run banks intervened through dollar sales, helping limit the rupee’s decline.

For businesses, currency movements can influence import costs, export competitiveness and financial planning. Companies with substantial foreign-currency exposure are therefore likely to continue monitoring global monetary policy alongside domestic demand.

Overall, the September PMI indicates that India’s private sector entered the final part of the quarter with stronger momentum than in August. At the same time, weaker export growth and cautious hiring show that the recovery remains uneven across different parts of the economy.

The combination of stronger manufacturing and services activity, easing input cost pressures and improved business confidence provides a mixed but broadly constructive picture of current operating conditions. The coming months will show whether the improvement in domestic demand can offset weaker international orders and sustain business expansion.