Iran war, oil shock fail to dent India’s private sector growth as April PMI rises
HSBC’s flash India Composite Purchasing Managers Index (PMI) compiled by S&P Global rose to 58.3 in April from 57.0 in March, remaining well above the 50 level that separates expansion from contraction for nearly five years, according to a Reuters report.
The increase was led by the manufacturing sector; While PMI increased from 53.9 to 55.9, the production index increased from 55.7 to 59.1. Services activity also strengthened, albeit at a more moderate pace; The business activity index increased from 57.5 to 57.9.
The recovery signals resilience in domestic demand at the start of the new fiscal year, even as businesses grapple with supply disruptions and high input costs triggered by the ongoing war in the Middle East.
“The survey showed that firms are building buffer stocks to manage uncertainties regarding the duration of the supply-side shock,” Pranjul Bhandari, HSBC’s chief India economist, told Bloomberg. He added that manufacturing led the rise, with faster growth in output and new orders.
Companies reported that demand overall was stronger, with new orders growing faster and remaining historically strong. But export trends were mixed; While manufacturers experienced the fastest increase in overseas orders in nine months, service firms posted the weakest increase in more than a year, which respondents attributed to the conflict in the Middle East.
The war disrupted the flow of energy in the Gulf; resources were virtually blocked in the Strait of Hormuz, and fuel and raw material costs increased. India, one of the world’s largest importers of liquefied petroleum gas (LPG), facing shortages has led the government to prioritize household supply over industrial use; This can put pressure on some businesses. Although input cost inflation has fallen since March, it has remained high and remains among the highest levels in almost three years. Although increases in output prices lagged behind input price pressures, firms continued to pass on some of these costs.
According to the survey, despite external factors, business activities were supported by capacity increase, improving demand conditions and investments in technology.
However, overall business confidence fell compared to the previous month; This reflects uncertainty regarding the duration of the conflict and its impact on energy supplies. At the same time, employment reached the fastest increase in the last 10 months; This shows that companies remain optimistic enough to expand their workforce.
The data comes as policymakers and investors assess the economic impact of the conflict. The International Monetary Fund has estimated India’s growth at 6.5 percent but warned that inflationary risks could weigh on the economy if energy prices remain high.
While the ceasefire between the US and Iran has been extended, uncertainty over global energy supplies remains and risks to growth and inflation remain delicately balanced even as India’s domestic demand shows signs of resilience.
(With input from Reuters and Bloomberg)
