India's business activity eased in September, with the HSBC Flash India Composite Output Index falling to 59.3 from 60.7 in August, according to preliminary results from a private survey released on September 23. This marked the first time in nine months that the index dropped below 60, though it remained above its long-term average. The report indicated that India's economy grew at a slower pace this month compared to previous months in 2024.
"The flash composite PMI in India rose at a slightly slower pace in September, marking the slowest growth observed in 2024. Both the manufacturing and service sectors exhibited similar trends during the month," said Pranjul Bhandari, chief India economist at HSBC.
The survey showed that manufacturing activity declined to 56.7 in September from 57.5 in August, while the services sector also slowed, with its activity index dropping to 58.9 from 60.9 the previous month. Despite this slowdown, both sectors had posted stable growth in the first quarter of FY25, with manufacturing registering a 7 per cent rise compared to 5 per cent growth in the same period last year.
Bhandari noted that employment growth in the services sector was particularly strong, reaching its highest level since August 2022, as firms responded to robust demand. However, input cost inflation picked up slightly in September. Output charge increases slowed in both sectors, with manufacturers facing a larger slowdown, which suggests a bigger reduction in their profit margins.
Respondents indicated that the overall expansion in business activity was largely driven by a strong increase in new orders. However, the growth rate slowed, marking the weakest pace so far this year. This applied to both total new business and new export orders.
In contrast, services sector growth hit a four-quarter high of 7.3 per cent in Q1FY25, up from 6.7 per cent in the previous quarter.
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