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India's private sector continued its robust growth trajectory in June, with the HSBC Flash India Composite PMI Output Index surging to a 14-month high of 61.0, up from 59.3 in May.

The latest data suggests a sharp and sustained expansion in business activity across both manufacturing and services, well above the long-run series average.

The PMI data reflects Indian companies scaling up production to meet stronger demand, both domestically and internationally. According to the survey, compiled by S&P Global, “output was boosted by favourable demand trends, efficiency gains and tech investment.” The report highlights that businesses are benefiting from a combination of rising new orders and enhanced operational efficiencies.

Manufacturing Leads Expansion; Services Activity Also Strengthens

Manufacturers led the growth momentum in June, with the HSBC Flash India Manufacturing PMI rising to 58.4 from 57.6 in May. This marked the best improvement in operating conditions since April 2024. The Manufacturing Output Index also climbed to 61.5 in June, up from 60.3 in the previous month, indicating a solid expansion in factory activity.

The services sector maintained its growth pace as well, with the HSBC Flash India Services PMI Business Activity Index reaching 60.7 in June, compared to 58.8 in May. Growth rates for both manufacturing and services reached two- and ten-month highs, respectively. Survey participants attributed the upturn to “healthy demand conditions and successful marketing” efforts.

New business orders increased across both sectors, with manufacturing experiencing a sharper upturn. Export demand also reached new heights, as companies reported stronger international sales to Asia, Europe, the Middle East, and the Americas. The increase in export orders was the strongest since comparable data collection began in September 2014.

Rising Backlogs and Hiring Spur Job Creation

The surge in new business continued to exert pressure on company capacities, with outstanding workloads accumulating for a third consecutive year. The rise in backlogs was broadly similar across manufacturing and services, reflecting steady demand conditions. In response, companies expanded their workforce to manage the growing workloads. Both full-time and part-time roles were added, with manufacturers reporting the strongest rise in employment since the start of the data series, while services firms noted a more moderate increase compared to May.

The report noted, “employment growth reached a series peak in the manufacturing industry, while service providers signalled a slower upturn in job creation than in May.”

Cost Pressures Ease as Input Price Inflation Softens

On the cost front, input prices rose modestly in June, with inflation rate marking the softening to a ten month low and falling below the long-run average. Firms reported higher costs for labour and metals such as copper, iron, and steel. Nevertheless, inflationary pressures softened across both sectors. While some companies raised their charges to offset higher costs, others chose to maintain pricing to attract more business.

“Although prices charged for Indian goods and services continued to increase in June, the rate of inflation retreated from May's six-month high,” the survey stated. In manufacturing, output price inflation remained elevated, matching May's level and standing among the highest since November 2013. Service providers, however, reported a slower increase in charges.

Business Confidence Dips Slightly but Remains Positive

Despite the positive growth indicators, business sentiment moderated slightly. Overall confidence regarding future business activity slipped to its lowest in just over two years but remained broadly in line with historical trends. Manufacturers showed a mild uptick in optimism, while service sector confidence saw a marginal decline.

Pranjul Bhandari, Chief India Economist at HSBC, said: "India’s flash PMI indicated strong growth in June. New export orders continued to fuel private sector business activity, especially in manufacturing. Meanwhile, the combination of robust global demand and rising backlogs prompted manufacturers to increase hiring. Employment growth is also healthy in the services sector despite slightly weakening on a sequential basis from May to June. Finally, input and output prices continued to rise for both manufacturing and services firms, but rates of increase showed signs of softening."