India's Private Sector Activity Shows Marginal Recovery in August as HSBC Composite PMI Rises to 54.6

India's private sector activity expanded at a slightly faster pace in August, according to the latest HSBC Flash India PMI report. The HSBC Flash India Composite Output Index rose to 54.6, recovering marginally from July's 52-month low of 54.3.

Despite the month-on-month improvement, the latest reading remains the second-weakest since March 2022, pointing to continued subdued growth across the broader economy. The composite index measures the month-on-month change in combined output from both the manufacturing and services sectors.

Indian companies reported a marginal increase in new order volumes during August, although the pace of growth remained below historical trends. According to the report, challenging market conditions, competitive pressures, and lower customer requirements restricted growth during the month.

A divergence was observed between the country's two primary economic sectors. The services sector registered a modest recovery following its weakest performance in 53 months in July. The HSBC Flash India Services PMI Business Activity Index increased to 54.5 in August from 53.3 in July, driven by strengthened growth in business activity and new work.

Conversely, the manufacturing sector lost momentum during the period. The HSBC Flash India Manufacturing PMI declined to 52.9 in August from 53.5 in July, marking its third consecutive monthly drop. This signaled a historically soft improvement in overall factory conditions.

The manufacturing output index also softened, dropping to 54.9 in August from 56.4 in July. The report noted that the manufacturing sector posted its weakest increases in production and new orders in five years.

While manufacturing companies reported greater purchasing activity in August to match incoming new orders, the pace of expansion in input purchases slowed to its weakest level in over five years. This slowdown in input buying also contributed to softer rates of inventory accumulation for both pre-production and post-production stages.

"The latest PMI data highlights a clear divergence in the Indian economy, where a services-led recovery is offsetting a softening manufacturing sector. While the slight rise in the composite index to 54.6 shows resilience, the persistent slowdown in manufacturing points to underlying challenges like competitive pressures and softer input demand. For businesses and entrepreneurs, navigating this environment requires careful inventory management and a close eye on consumer demand trends as the broader market growth remains subdued." — Dr. Shishir Gupta, Founder & CEO, StartupLanes