India's business activity in April reached its highest level in nearly 14 years, driven by robust demand. The country's economic expansion, as indicated by the HSBC's flash India Composite purchasing managers' Index, highlights sustained growth momentum and positive job creation. Both the manufacturing and service sectors showed strong performance, with new orders boosting the composite output index to its highest level since June 2010.
The services sector led the strong expansion, with a notable increase in new business, while manufacturing activity remained steady. Despite a slight deceleration in growth compared to the previous month, output and new orders in both sectors continued to expand. International demand also contributed to the solid performance, with overall sales outlook improving for the next 12 months. The rise in demand allowed businesses to pass on increasing costs to customers, supporting improved margins for manufacturers.
While employment in manufacturing saw significant growth, job creation in the services sector slowed down compared to the previous month. Input costs for goods producers and service providers cooled off, but inflation is expected to persist above the central bank's target rate of 4 per cent, potentially delaying any immediate rate cuts by the Reserve Bank of India. Despite the positive outlook for the economy, concerns remain about inflation levels and their impact on monetary policy decisions in the near future.