Private sector activity in May at 13-month high

India's private sector activity surged to a 13-month high of 61.2 in May from 59.7 in April, driven by an acceleration in services, according to a private survey released on Thursday.

The HSBC Flash India Composite Output Index was 60.5 in May 2024. The Composite Purchasing Managers Index (PMI) is a weighted average of comparable manufacturing and services indices. "India's flash PMI indicates another month of strong economic performance," said Pranjul Bhandari, chief India economist at HSBC.

The increase in service sector output was the fastest in 14 months, while the manufacturing sector recorded the slowest increase in three months. Survey respondents attributed growth at the composite level to buoyant demand, investment in technology and expanded capacities. However, some firms noted that price pressures, competition and the India-Pakistan conflict negatively impacted operations.

On April 2, the US announced reciprocal tariffs on various countries, imposing a 26% tariff on Indian imports. While US announced a 90-day pause until July 9, a baseline tariff of 10% remains in effect.

While manufacturing sector was negatively hit across Asia due to trade uncertainties, domestic-oriented economies like India were outliers. New orders also picked up, with support from international demand. The private sector recorded the fastest increase in exports in a year, said the survey.

"Growth in production and new orders among manufacturing firms remains robust, despite a marginal cooling from the rates of increase observed in April," said Bhandari.