India's manufacturing industry has regained its growth momentum in October, with the acceleration supported by quicker increases in factory production and services activity, according to a new report. The report, compiled by S&P Global as part of the latest HSBC 'flash' PMI survey, indicates that India's private sector economy continued to showcase robust growth in October.

The survey also highlighted that hiring was stronger in the service sector. The latest increase in employment was sharp and the quickest in 18-and-a-half years. Nevertheless, jobs still rose at a marked pace in the manufacturing industry, supporting the best upturn in payroll numbers at the composite level since February 2006. Anecdotal evidence indicated that part and full-time workers had been taken on, with both permanent and temporary contracts offered.

Pranjul Bhandari, Chief India Economist at HSBC, noted that several components accelerated after a modest slowdown over the past two to three months. New orders and new export orders expanded at faster rates, providing a good omen for industrial production for the remaining months of 2024.

India's Economic Outlook and Challenges

A quicker upturn in new work intakes encouraged companies to scale up business activity and recruit additional workers. In October, the uptick in growth momentum was accompanied by an intensification of price pressures. Manufacturers outperformed service providers regarding rates of expansion for output and sales, and also recorded faster increases in input costs and selling charges.

India's manufacturing and service sectors were inside growth territory (above 50.0) for the thirty-ninth successive month. The survey also revealed that Indian businesses indicated a sharp increase in new order intakes during October. The expansion, which was mostly linked to positive demand trends, was also stronger than that recorded in September.

Latest data revealed that part of the upturn in total new orders was fuelled by an improvement in international demand for Indian goods and services. Rates of expansion in export sales accelerated at manufacturing firms and their services counterparts.

The Broader Economic Trends and Future Prospects

The survey's findings align with the broader economic trends observed in India over the past year. The country's manufacturing industry has been on a steady recovery path, bolstered by strong domestic demand and improving export prospects. The government's focus on infrastructure development and policy reforms has also played a crucial role in fostering a conducive environment for industrial growth.

The robust growth in the manufacturing sector has had a positive spillover effect on the services sector, particularly in areas such as logistics, retail, and financial services. The uptick in manufacturing activity has led to increased demand for these services, leading to job creation and wage growth. The strong performance of the services sector, in turn, has contributed to the overall growth of the private sector economy.

However, the survey also pointed out some challenges. The intensification of price pressures, driven by faster increases in input costs and selling charges, poses a risk to the sustainability of the growth momentum. Manufacturers have been trying to pass on higher costs to consumers by raising output prices. While this strategy may help maintain profitability in the short term, it could dampen demand and slow down growth in the long run.

In conclusion, the latest HSBC 'flash' PMI survey paints a positive picture of India's manufacturing industry and private sector economy. The strong growth momentum, supported by quicker increases in factory production and services activity, is a testament to the resilience of the Indian economy. However, the intensification of price pressures underscores the need for careful management of inflation risks to ensure the sustainability of the growth momentum. The future prospects of India's economy remain promising, with the potential for continued robust growth in the manufacturing and services sectors.