Driven by a surge in the services sector demand, India’s private sector activity showed the fastest expansion in August, a survey revealed on Thursday.
Despite expectations for a slowdown in the economic growth this fiscal, HSBC’s flash India Composite Purchasing Managers’ Index (PMI), which is compiled by S&P Global, was 65.2 in August as against 61.1 last month.
The services sector activity index soared to 65.6 following an 18-year upsurge in the total new orders, which is also a key gauge of demand.
Since the survey began to be conducted in December, 2005, this is the first time the reading has been this high. A reading above the 50-mark separates growth from contraction for the 49th month.
Also Read: Retail inflation drops to 8-year-low
Meanwhile, the manufacturing sector has also showed significant strength with a PMI of 59.8 – its highest since January, 2008. Not only does this translate to more job creation, the survey also revealed that companies passed on increases in input costs to customers, showed in a 12-year increase in output price index of 55.8 from 53.5 in July.
This figure has offset the recent trend of easing inflation as seen in government data, dropping to an eight-year-low of 1.55 per cent in July.
The Reserve Bank of India (RBI), which ensures inflation stays in its 2-6 per cent ‘tolerance’ range, has reduced interest rates to a total of 100 basis points this year to stimulate the economy. Though it made no further cuts to the repo rate in its latest meeting, it is expected to make another cut next quarter before the year ends.
The PMI has reinstated optimism in firms, the highest since March.
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