India’s Business Activity Hits Four Month High in October, but Hiring Remains Flat

BENGALURU, Oct 23: India’s private sector business activity accelerated to a four month high in October, supported by stronger new orders and improved demand for services, although companies remained cautious about expanding their workforce, according to preliminary purchasing managers’ survey data released on Friday.

The HSBC Flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 56.7 in October from 55.9 in September. The latest reading also exceeded the median forecast of 56.1 in a Reuters poll, indicating that business conditions strengthened more than anticipated.

A PMI reading above 50 indicates expansion, while a figure below that threshold signals contraction. The October reading therefore pointed to continued growth in India’s private sector, although the index remained below its average for the year.

The improvement was largely driven by the services industry, which recorded stronger activity and demand during the month. However, the survey also highlighted a gap between rising business workloads and employment growth, suggesting that companies were relying on their existing employees rather than immediately recruiting additional staff.

According to the survey, the services PMI increased to 56.2 in October from 55.2 in September. The improvement reflected stronger demand and helped drive the overall acceleration in private-sector output.

Despite the rise in activity, employment in the services sector remained unchanged, bringing a nine-month period of continuous hiring to an end. Businesses indicated that their existing staffing levels were sufficient to manage current workloads.

The development presents a mixed picture for the economy. Stronger orders and expanding business activity indicate that companies continue to find opportunities for growth, but the pause in recruitment suggests that improved demand has yet to translate into broader employment expansion.

Manufacturing maintains growth

India’s manufacturing sector also recorded an increase in output, although the pace of recruitment slowed. The manufacturing PMI declined marginally to 54.9 in October from 55.1 in the previous month.

The reading remained comfortably above the 50-point threshold, indicating that manufacturing conditions continued to improve. However, the slight decline suggested that the sector’s overall expansion was less pronounced than in September.

The difference between the manufacturing and services readings highlighted the importance of service-sector demand in supporting the latest improvement in private-sector activity.

Companies across the economy also reported a reduction in outstanding work. The survey indicated that overall backlogs fell at a pace jointly the fastest in nearly six-and-a-half years, suggesting that businesses were managing existing orders more efficiently.

A decline in unfinished work can indicate that companies have sufficient capacity to meet demand. However, if new orders continue to increase without additional recruitment, businesses may eventually need to reconsider staffing levels to sustain production and service delivery.

Exports provide additional support

International demand offered another source of support for Indian businesses in October. Overall export orders increased at their fastest pace in six months, according to the preliminary survey.

The improvement was concentrated among goods producers, indicating that manufacturers benefited from stronger overseas demand. In contrast, the rate of growth in foreign requests for services weakened.

The divergence suggests that export conditions varied across industries. While goods-producing companies experienced an improvement in international orders, service providers faced a less pronounced increase in demand from overseas customers.

Export performance remains important for businesses seeking to diversify revenue beyond the domestic market. Stronger overseas orders can support production, improve capacity utilisation and create opportunities for companies to expand their customer base.

Nevertheless, the survey’s findings do not establish whether the improvement in export demand will continue in the coming months. Global economic conditions, trade policies and fluctuations in international demand will remain relevant to businesses assessing their future plans.

Cost pressures ease

The survey offered some relief on the price front, with input-cost inflation easing to its lowest level in almost a year. In addition, increases in selling prices were the weakest since March 2025.

Lower input-cost pressures can provide businesses with greater flexibility in managing operating expenses and protecting profit margins. Companies facing less expensive raw materials, intermediate goods or other business inputs may find it easier to absorb costs without immediately increasing prices for customers.

For consumers, slower selling-price increases may help moderate the pace at which businesses pass on higher operating expenses. However, the survey findings indicate a slower rate of price increases rather than an outright fall in prices.

The moderation in costs also comes at a time when businesses are balancing growth opportunities against uncertainties surrounding the wider economic environment. The extent to which lower input-cost inflation translates into stronger profitability will depend on demand conditions, productivity and companies’ pricing decisions.

Business confidence improves

Business confidence recovered in October to its highest level since May, although it remained below the average recorded during the year.

The improvement suggests that companies were more optimistic about their near-term prospects than in recent months. Stronger orders, continued expansion and easing cost pressures may have contributed to the improved outlook.

However, the relatively cautious employment picture indicates that businesses are not yet responding to better activity by increasing recruitment across the board.

The survey provides an early indication of economic conditions because it captures business responses before complete official data become available. As a preliminary reading, it may also be revised when final figures are published.

Overall, October’s results point to an economy in which business activity is strengthening, services are providing the main impetus and international orders are supporting selected industries. At the same time, stagnant employment in services and slower recruitment in manufacturing underline the need to distinguish output growth from job creation.

The next phase of expansion will depend partly on whether stronger demand persists long enough to encourage companies to increase investment, expand their workforce and build capacity. For now, the survey indicates that India’s private sector is growing at a faster pace, but businesses continue to manage their resources cautiously.