India's private sector growth maintained strength in September but showed a slight cooling from the multi-year high seen in August, a survey by HSBC's flash India Composite Purchasing Managers' Index (PMI) revealed on Tuesday.
The PMI fell to 61.9 this month, down from 63.2 in August, and slightly below the Reuters poll median forecast of 62.9. Despite this, it marked the second-sharpest rate of expansion in just over two years, comfortably above the 50-mark indicating growth.
The moderation in growth was evident across the economy, with both factory output and services growth showing a slowdown. The manufacturing PMI dropped to 58.5 from 59.3, while the services business activity index fell to 61.6 from 62.9.
Although total new business continued to grow sharply, the pace was slower compared to August. Some firms mentioned that intense competitive pressures were limiting order intakes. Moreover, international demand weakened, with new export orders rising at the slowest rate in six months, primarily due to a notable deceleration in the services sector.
Job creation also eased from the previous month, with only a small percentage of manufacturers and service providers reporting an increase in payrolls. This suggests that despite the rapid growth, companies are not under significant pressure to expand their workforce, which could be a concern for policymakers in an economy that needs to accommodate millions of new workers annually.
On the inflation front, while overall input cost inflation decreased, manufacturers raised selling prices at the sharpest rate in nearly 13 years due to higher material costs like cotton and steel. This was partly offset by a cooling in charge inflation within the services sector.
Looking ahead, business sentiment improved to a seven-month high, with firms hopeful about demand strength and expecting a boost from the recent cut in the goods and services tax (GST). The new tax concessions, effective from Monday, are anticipated to stimulate consumer demand ahead of the festive season, especially amidst the economic uncertainties caused by U.S. tariffs.
Exporters have warned that the full impact of higher tariffs may be felt this month, potentially deepening the slowdown seen in private sector activity. This uncertainty adds to the challenges facing India's economic growth trajectory in the near term.
