Bharat’s economic momentum surged in May, buoyed by a remarkable surge in exports, according to the latest Purchasing Managers’ Index or PMI data. The flash India Composite PMI, compiled by S&P Global and HSBC, climbed marginally to 61.7 from April’s 61.5, marking the 34th consecutive month of expansion.
Pranjul Bhandari, HSBC’s chief economist for Bharat, noted, “The composite PMI for May reflects the third strongest reading in nearly 14 years, driven by a notable acceleration in the service sector.”
The flash services PMI reached a four-month peak of 61.4, indicating robust growth compared to April’s 60.8, while the preliminary manufacturing PMI, though slightly lower at 58.4, still showed strong expansion.
A key driver of this growth was the surge in exports, which hit an all-time high, marking the fastest expansion since the series began in September 2014. This surge in international demand also strengthened confidence among businesses, with optimism levels in the services sector reaching their highest point since May 2013, and manufacturers displaying the most optimism in over nine years.
The positive sentiment translated into significant job creation across the private sector, with services witnessing the fastest pace of employment growth in 21 months, and overall private sector job creation at its highest since September 2006.
However, rising input costs, reaching nine-month high, posed challenges for businesses, leading to margin pressures, particularly in the service sector. Despite the increase in costs, companies raised selling prices at a faster pace compared to April, although not all increased costs were passed on to consumers.
The surge in input costs could potentially slow the decline in retail inflation, prompting speculation about the Reserve Bank of India’s stance on interest rates. While a media poll suggested that the RBI might maintain elevated interest rates in its June meeting, with a possible rate cut in the next quarter, the situation remains dynamic, dependent on numerous economic factors.
