Manufacturing and Services Sectors Regain Momentum in June, HSBC Survey Shows

Indian businesses in both the manufacturing and services sectors, which experienced a slowdown in growth in May, regained their momentum in June with business activity picking up at a quicker pace. According to the HSBC India Flash Survey released on Friday, there was a substantial upturn in aggregate employment amid robust expansions in total new order intakes and international sales as price pressures receded. The survey, compiled by S&P Global, indicates a positive outlook for the Indian economy as it moves past the disruptions of the previous month.

PMI Indicators Show Strengthening Growth

The services purchasing managers’ index (PMI) climbed to 60.4 in June 2024 from 60.2 in May, while the manufacturing PMI increased to 58.5 in June from 57.5 in the previous month. The PMI is an economic indicator derived from a monthly survey of private sector companies, with a reading above 50 indicating expansion in economic activity.

Manufacturing Sector Overcomes May's Setbacks

India’s manufacturing activity had slipped to a three-month low of 57.5 in May due to intense heatwaves leading to reduced working hours and impacted volumes. However, the sector rebounded in June with the Manufacturing PMI Output Index rising to 62.1 from 61.1 in the previous month. This indicates a faster pace of growth as new orders gained momentum.

Services Sector Sees Renewed Growth

Similarly, the services sector, which had seen growth soften to a five-month low in May due to stiff competition and price pressures amid a severe heatwave, also regained strength. The sector's PMI climbed to 60.4 in June, highlighting the resilience and recovery of the services industry.

Towards a $10-Trillion Economy

India aims to grow into a $10 trillion economy over the next decade, driven by growth in the manufacturing sector. The push for manufacturing growth is expected in sunrise sectors such as semiconductors, electronics manufacturing, the electric vehicles ecosystem, renewable energy, and defense, among others. To this end, the central government has significantly increased its capital expenditure budget in recent years to improve infrastructure, create jobs, and accelerate economic growth.The government has also announced production-linked incentive (PLI) schemes across 14 key sectors in 2020 with an outlay of ₹1.97 trillion (over $26 billion) for five years starting from FY2021-22, to enhance the country's manufacturing capabilities. Meanwhile, India's services sector—among the world's fastest-growing—accounts for more than half of the country's gross domestic product, playing a crucial role in the nation's economic expansion.

Looking Ahead

The final PMI data, which will be released next month, will provide further insights into the economic trajectory. The current indicators suggest a robust recovery and a positive outlook for both the manufacturing and services sectors in India.