India Business Activity Hits Four-Month High in October as Services Demand Strengthens

India's business activity grew at its fastest pace in four months in October, supported by stronger new orders and an improvement in services demand. However, hiring nearly came to a standstill as companies relied on existing employees to manage workloads, according to a preliminary business survey.

The HSBC Flash India Composite Purchasing Managers' Index (PMI), compiled by S&P Global, climbed to 56.7 in October from September's final reading of 55.9. The figure also exceeded the median forecast of 56.1 in a Reuters poll. A PMI reading above 50 indicates expansion, although the latest result remained below this year's average.

Services Sector Leads Growth

India's services PMI increased to 56.2 from 55.2, accounting for most of the acceleration in private-sector activity. Demand strengthened during the month, but employment remained unchanged, bringing a nine-month run of hiring to an end.

Manufacturing output also recorded an increase, although growth in recruitment slowed. As a result, the sector's headline PMI eased to 54.9 from 55.1 in September.

Businesses reported that their existing workforce was sufficient to meet current demand. Meanwhile, outstanding work declined at a pace matched only by the fastest rate recorded in nearly six-and-a-half years, suggesting that companies were making progress in clearing backlogs.

Export Orders Strengthen, Price Pressures Ease

International demand provided further support to business activity, with total export orders growing at their fastest pace in six months. The improvement was largely driven by goods producers, while growth in overseas demand for services weakened.

Cost pressures eased across both manufacturing and services. Inflation in input costs slowed to its lowest level in almost a year, while increases in selling prices were the weakest since March last year.

Business confidence also improved, reaching its highest level since May. However, sentiment remained below the average recorded so far this year.