India's economic momentum remains strong in August 2024, maintaining its position as the world's fastest-growing major economy. This resilience comes despite expectations of a global economic slowdown, highlighting the country's robust domestic market and diverse economic sectors.
According to the latest HSBC flash India Composite Purchasing Managers' Index (PMI), compiled by S&P Global, the country's business activity continued its expansion streak. The index registered a slight dip to 60.5 in August from 60.7 in July, remaining well above the 50-mark that separates growth from contraction. This marks over three years of continuous expansion, the longest such run since June 2013.
Pranjul Bhandari, chief India economist at HSBC, noted that while the composite PMI experienced a minor decrease, it remained significantly higher than the historical average. This indicates sustained strong demand and favorable market conditions across various sectors of the Indian economy.
The services sector, which contributes about 55% to India's GDP, showed particular strength. The flash services PMI index rose to 60.4 in August from 60.3 in July, reflecting the sector's growing importance in driving economic growth. Meanwhile, the manufacturing PMI, although slightly lower at 57.9 compared to 58.1 in July, still indicated robust expansion.
However, the data revealed some areas of concern. Export growth slowed to its weakest pace since April 2024, signaling the impact of weak global demand on India's external trade. This aligns with the broader trend of global economic uncertainties affecting international commerce.
Inflation remains a key focus for policymakers and businesses alike. While overall input costs increased at their weakest pace since February 2024 and output prices rose at a slower rate compared to July, prices charged on manufactured goods surged at the fastest rate in nearly 11 years. This dichotomy highlights the complex inflationary pressures within the Indian economy.
The Reserve Bank of India (RBI), established on April 1, 1935, faces the challenge of managing these inflationary pressures. Despite retail inflation falling to a near five-year low in July 2024, experts caution that this may be temporary due to base effects, emphasizing the need for continued vigilance in monetary policy.
Business confidence for the coming 12 months waned in August, primarily due to concerns about inflation and competition. This sentiment reflects the broader uncertainties facing the global economy and the need for businesses to adapt to changing market conditions.
India's economic landscape is diverse and dynamic. As the world's largest democracy by population and the fifth-largest economy by nominal GDP, India has shown remarkable resilience. The country boasts the world's third-largest startup ecosystem, demonstrating its capacity for innovation and entrepreneurship.
The manufacturing sector, contributing about 17% to India's GDP and employing approximately 12% of the workforce, plays a crucial role in the country's economic diversification efforts. The government's focus on initiatives like "Make in India" aims to boost this sector further.
India's financial markets, including the Bombay Stock Exchange established in 1875, continue to attract global investors. As a member of the BRICS economic group, India's economic performance has significant implications for global economic trends.
While challenges persist, India's economic indicators suggest a continued trajectory of strong growth. The country's ability to maintain robust business activity amidst global uncertainties underscores its economic resilience and potential for further expansion in the coming years.