Indian companies grow at slowest pace in nine months, HSBC Flash PMI says

New Delhi: Economic activity in India slowed in September, with output and new orders growing at their slowest pace in nine months, a flash survey by HSBC Holdings Plc showed.

However, employment continued to grow at a solid pace amid improved business confidence. The survey indicated that growth remained strong, as indicated by responses from 400 manufacturers and 400 service providers.

The preliminary HSBC PMI survey, conducted by S&P Global, showed a strong inflow of new orders, solid job creation and optimistic expectations for economic growth.

The rate of inflation in input costs and output prices was relatively muted, with service providers increasing their fees at the slowest pace in just over two and a half years.

India’s services sector business activity index (PMI) came in at 58.9 in September, down from 60.9 in August. This means that services sector business activity slowed slightly in September compared with the previous month.

India’s manufacturing PMI fell to 60 in September from 60.3 in the previous month, indicating a slowdown in the manufacturing sector.

India’s manufacturing PMI, which covers both manufacturing and services sectors, rose to 59.3 in September from 60.7 in the previous month.

Meanwhile, the HSBC Flash India Manufacturing PMI index was 56.7 in September, down from 57.5 in August.

“The reading indicates a further marked improvement in business conditions for goods producers, but the pace of improvement was the weakest since January,” the survey said.

Increase in the number of new orders

According to the survey, the expansion of total business activity showed that new orders continued to grow rapidly. However, the pace of growth weakened and was the weakest this year. This applied to both total new business activity and new export orders.

“India’s PMI rose at a slightly slower pace in September, marking the slowest growth seen in 2024. Both manufacturing and services sectors followed similar trends during the month. However, the pace of growth remained well above the long-term average,” said Pranjul Bhandari, chief India economist at HSBC.

“New order growth was tempered by the September contraction, but employment levels rose at a faster pace, supported by improving business confidence. In fact, service sector employment growth was the fastest since August 2022 as firms responded to a solid increase in new orders,” Bhandari said.

“On the price front, input cost inflation rose at a slightly faster pace in September. The pace of growth in input charges slowed down across both sectors, with manufacturers seeing a larger slowdown, implying a larger reduction in their margins,” Bhandari added.

The Dream of a $10 Trillion Economy

India aims to become a $10 trillion economy within the next decade, with its expanding manufacturing sector expected to drive growth.

Key areas of interest include semiconductors, electronics manufacturing, electric vehicle ecosystem, renewable energy and defense.

To realise these ambitions, the central government has increased capital spending to strengthen infrastructure, create jobs and stimulate manufacturing growth.

“Despite lower growth in production and new orders in September, companies in India continue to be very optimistic about an increase in business activity in the coming year,” the survey said.

“Moreover, confidence has strengthened since August and has been above average since the series began in 2012. Firms generally expect to be able to secure new business over the next 12 months, supporting output growth,” it added.

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