India’s Business Activity Hits Three-Month High In November; Driven By Services And Job Creation

India’s business activity surged to a three-month high in November, fueled by strong growth in the services sector and a record pace of job creation, according to the latest HSBC survey. The data highlights a continued expansion in economic activity, signaling positive trends in both domestic demand and employment.

Pranjul Bhandari, chief India economist at HSBC, commented on the results: “Services saw a pick-up in growth, while the manufacturing sector managed to outperform expectations despite a slight slowdown compared to October’s PMI reading.”

Growth In Services And Manufacturing Continues

HSBC’s flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 59.5 in November, up from 59.1 in October, indicating ongoing economic expansion. The PMI level above 50 signifies growth, while anything below that marks contraction.

The services sector saw its PMI increase to 59.2 in November from 58.5 in October, reaching its highest level since August. The manufacturing sector also registered growth but at a slightly slower pace, with its PMI slipping to 57.3 from 57.5.

Domestic Demand Boosted By Services Sector

Domestic demand showed a significant increase, largely driven by higher sales in the services sector. This helped offset slower growth in manufacturing. Additionally, export demand surged during the month, with overseas demand for services reaching a four-month high.

Rising Optimism And Record Job Creation

The robust performance has also improved the business outlook for the coming year, with overall optimism rising to its highest level since May. This surge in confidence has led to increased hiring across industries. In fact, employment generation reached its fastest pace since the survey began in December 2005, which signals a healthy economy and growing consumer spending power.

Inflation Pressures Pose A Concern

Despite the positive economic trends, rising inflation remains a concern. Bhandari noted, “Price pressures are rising for raw materials used by manufacturers, as well as food and wage costs in the services sector.” These inflationary pressures could affect future economic stability.

Positive Outlook For India’s Exports

The Reserve Bank of India’s (RBI) November bulletin also highlighted the positive outlook for India’s exports, with the country gaining a larger share in the global trade of key manufacturing goods. India now holds 13% of the global market share in petroleum products, demonstrating its increasing refining capabilities and adherence to international standards.

Private Consumption And Urban Growth Drive Domestic Demand

The RBI report further emphasized that private consumption has returned as the key driver of domestic demand. Retailers are reporting stronger sales growth compared to the second quarter, with festival spending contributing to the boost in real economic activity. The surge in demand for e-two-wheelers this Diwali and the growing premiumisation trend, evident in the luxury car segment, are clear indicators of this shift.

With India’s urban population expected to quadruple by 2025, and half of the population projected to live in cities, urban demand is set to rise significantly, further driving economic growth.