India’s private sector activity climbed to a three-month high of 61.4 in July, up from 60.9 in June, according to the data released on July 24. In July, the Services Purchasing Managers’ Index (PMI) climbed to 61.1, up from 60.5 the previous month. Similarly, the Manufacturing PMI increased to 58.5 from 58.3 during the same period. The increase in output in July was driven by continued growth in manufacturing sector activity, while the expansion rate in services also quickened and stayed above its long-term average.
"Amid reports of higher material, transportation and labour costs, overall input prices rose further in July. Manufacturers particularly noted higher prices for coal, leather, pharma products, rubber and steel. Services companies specifically cited egg, meat and vegetables as sources of inflation," the report states.
The HSBC Flash India Composite Output Index – a seasonally adjusted index that measures the month-on-month change in the combined output of India's manufacturing and service sectors – highlighted the strongest rate of expansion for three months.
A recent NCAER-NSE survey suggests that the first quarter's activity is likely to surpass that of the previous quarter, with an improved outlook for the future. Additionally, the PMIs noted a rise in employment in June.
"The latest results also revealed that rising material and labour costs added to inflationary pressures. In particular, selling prices rose to the greatest extent since February 2013,” the report states.
On July 23, Finance Minister Nirmala Sitharaman announced three employment-linked incentive (ELI) schemes for two years and a five-year internship program in partnership with India Inc, as part of the Union Budget for 2024-25, aimed at stimulating job creation in the economy.
She also unveiled the Prime Minister’s package of five schemes and initiatives aimed at creating employment, skilling, and other opportunities for 4.1 crore youth over a five-year period, with a central outlay of ₹2 lakh crores. "This year, I have made a provision of ₹1.48 lakh crores for education, employment and skilling," she added.
Sitharaman stated that the government will implement three 'Employment Linked Incentive' schemes as part of the Prime Minister’s package. These schemes will be based on EPFO enrolment, focusing on recognising first-time employees and providing support to both employees and employers.
Pranjul Bhandari, chief India economist at HSBC, said, “The Flash Composite Output Index signalled continued robust growth in India’s private sector. The rise in output in July was led by a further increase in business activity in the manufacturing sector, while the pace of expansion in services output also accelerated and remained well above its long-run average. As a result, companies turned more optimistic in July, following a moderation in business confidence in June. We note that the rate of input cost inflation continued to trend higher in both sectors, which has driven firms to keep raising sales prices.”
