Private sector activity gathers pace in May, job creation highest in 18 years

India's private sector activity picked up in May, recording the third strongest increase since July 2010 and contributing to optimism about the future, according to the preliminary results of a private survey released Thursday. The survey also showed the sharpest upturn in employment in nearly 18 years.

The HSBC Flash India Composite Output Index rose to 61.7 in May compared with 61.5 in the previous month, as export demand strengthened further and the services sector accelerated.

"The latest data showed strength in new export orders for both sectors, which rose at the fastest pace since the series started in September 2014," said Pranjul Bhandari, chief India economist, HSBC.


While manufacturing sector activity eased slightly to 58.4 compared with 58.8 in the previous month and was slowest since February, it was still higher than the long-term average.

A reading of above 50 signifies expansion.

On the other hand, services rose to its fastest pace in four months.

Flash PMI records 80% of responses of 800 firms across the manufacturing and services industry. Final numbers will be released in the first week of June.

Services would have likely contributed to growth in the fourth quarter of FY24, according to an ET poll. The latest poll pegged Q4FY24 growth at 6.8%, with FY24 growth at 7.8%.

The median of 16 forecasts in ET Poll was 6.8% for FY25, in line with the IMF estimates.

The improved optimism was also reflected in the future output index, which rose nearly seven points in May.

"The level of optimism about the year ahead increased to its highest in over 11 years, resulting in firms increasing their staffing levels," Bhandari said.

Employment growth has stuttered since last year, but May showed signs of improvement.

"Another factor that supported growth of headcount was an intensification of capacity pressures. Combined across the manufacturing and service sectors, outstanding business volumes rose to the greatest extent in 21 months," the report noted.