PMI Data Shows Business Growth in Eight Key Sectors Down Amid RBI Policy Concerns

PMI Reports Slowing Business Growth

India's business activity growth has slowed to a nine-month low this September, reflected in the latest HSBC flash India Composite Purchasing Managers' Index (PMI) data, which shows the index decreasing from 60.7 in August to 59.3. This decline indicates a slowdown in business activity; however, it remains within expansion territory. The 50-mark threshold signifies the difference between growth and contraction.

Sector Performance Insights

• The manufacturing sector's PMI fell to an eight-month low of 56.7.
• Services saw PMI drop to 58.9, the lowest since November 2023.
• Despite the downturn, employment in the services sector surged, marking the fastest growth in two years.

Key indicators such as new business and orders reflected a mild increase, signaling continued expansion despite a cooling of demand. Chief India economist Pranjul Bhandari noted that, while the flash composite PMI highlighted slower growth, it still showcased a significant level exceeding long-term averages.

Inflation and RBI Policy Outlook

As input costs escalate, firms reported increasing raw material prices but opted not to fully transfer these costs to consumers, leading to muted price adjustments. Bhandari commented on the inflationary concerns that the Reserve Bank of India (RBI) may consider during its upcoming policy meeting in October. Analysts suggest that recent inflation trends warrant a cautious approach from the central bank.

Although business activity has decelerated mildly, the overall outlook remains optimistic, suggesting that economic momentum may translate to better performance in the upcoming months. Investors and firms are encouraged to monitor the RBI’s decisions, which will be crucial in navigating inflation risks and fostering economic growth.