India's June Business Growth Accelerates, Job Creation Reaches 18-Year Peak: PMI

June PMI: The index rose to 60.9 in June from May's reading of 60.5. This marks nearly three years of the index staying above the 50-level, which separates growth from contraction on a monthly basis

The pace of job creation reached its highest level in over 18 years, says HSBC's flash India Composite PMI.

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June PMI: India’s business activity surged at a faster rate this month compared to May, driven by robust gains in both manufacturing and services sectors. A business survey revealed that the pace of job creation reached its highest level in over 18 years. According to HSBC's flash India Composite Purchasing Managers' Index (PMI), compiled by S&P Global, the index rose to 60.9 in June from May's final reading of 60.5. This marks nearly three years of the index staying above the 50-level, which separates growth from contraction on a monthly basis.

As the first fiscal quarter ended, strong performances in manufacturing and services set a solid foundation for India's economy. This follows an 8.2 per cent expansion last year, marking the fastest growth among major countries, largely due to buoyant manufacturing.

"The composite flash PMI ticked up in June, supported by rises in both the manufacturing and service sectors, with the former recording a faster pace of growth," said Maitreyi Das, global economist at HSBC.

The manufacturing index showed a notable increase, rising to 58.5 from 57.5 in May, while the services sector slightly improved to 60.4 from 60.2. This continued expansion in India comes despite a slowing global economy, backed by strong growth in manufacturing output and orders, as well as business gains in services.

New export orders expanded for the 22nd consecutive month in June, though the pace slightly eased from last month's record growth. This robust demand prompted companies to increase hiring, with overall employment rising at the fastest rate since April 2006. Job creation was particularly strong among manufacturers compared to the services sector.

Boosting employment remains a significant challenge for the Narendra Modi government, which was re-elected for a rare third term earlier this month. According to a Reuters poll, addressing this issue is crucial for the administration.

Meanwhile, firms have seen a decrease in price increases since May, which bodes well for the outlook on retail inflation. Services input cost rises eased to a four-month low, while the pace of price increases charged to clients remained largely unchanged.

"Input cost inflation eased slightly in June but remained elevated, with panellists citing increases in labour and material costs. The output price index suggests manufacturing firms were able to pass on higher costs to customers," added Das. "Optimism about future output weakened in June but remained above the historical average."

Despite business optimism dipping to a three-month low, the outlook for the coming year remains positive. Companies expect output gains based on planned proposals, efficiency improvements, and forecasts for favourable exchange rates.