New flash survey points to surge in economic activity in January

Mumbai: Mumbai: Indian economic activity rose to a four-month high according to the recently launched HSBC flash India Composite Purchasing Managers’ Index (PMI). The index climbed to a four-month high of 61 in January from 58.5 in December. The index, based on a survey of businesses, revealed that services activity was at a five-month high.

“Post covid economic recovery was driven largely by goods demand. That cycle was complete, and it is now good to see that services are picking up,” said Pranjul Bhandari, chief India economist at HSBC. She said that the acceleration in the growth momentum supported the RBI’s forecast of a higher growth rate.

The Purchasing Managers' Index (PMI) is an economic indicator that reflects the prevailing direction of economic trends in manufacturing and services sectors, obtained by surveying businesses on new orders, production, employment, supplier deliveries, and inventories. HSBC PMI are compiled by S&P.

According to Bhandari, the increase in demand was not raising inflation alarms despite a rise in service labour costs. “We have seen that while input costs have increased for service providers, they have not passed it to output prices. They have taken a hit on their margins, and demand continues to be high. We are not in a situation where core inflation will rise,” she said.

“When GDP growth is strong, core inflation rises, everything else is constant. However, everything is not constant. One of the big changes is oil prices, which have fallen dramatically from $100 levels in 2022 to $75 in 2023, which gave an opportunity for manufacturers to improve margins and cut output prices because of falling oil prices,” said Bhandari.

Within the flash PMI, the HSBC Flash India Manufacturing PMI stood at 56.9 in January, up from 54.9 in December, while the services index rose to 61.2 in January from 59 in December. S&P compiles the indices.