Business Activity Rebounds in April as Factories and Services Recover from March Slowdown

India's Private Sector Activity Sees Strong Recovery in April

India's private sector business activity showed a significant improvement in April, with both manufacturing and services sectors recovering from the lows experienced in March. This strong start to the new fiscal year comes despite the ongoing Iran war, which has continued to disrupt fuel supplies for the second consecutive month.

The HSBC Flash Composite PMI rose to 58.3 in April from 57.0 in March, indicating a faster expansion in overall business activity. A reading above 50 signifies growth, and this increase suggests a positive trend for India's economy.

According to Pranjul Bhandari, chief India economist at HSBC, private sector activity accelerated in April after easing in March due to disruptions linked to the Middle East conflict. Manufacturing led the upturn, with faster growth in output and new orders.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Domestic demand remains resilient

The pickup in private sector activity shows that domestic demand has remained resilient despite firms facing higher input costs, supply-chain disruptions, and uncertainty linked to the West Asia conflict. The rebound was led by manufacturing, while services also regained momentum.

Manufacturing sees significant improvement

The manufacturing PMI climbed to 55.9 in April, recovering from a four-year low of 53.9 in the previous month. Firms were building buffer stocks to manage uncertainty over the duration of supply-side shocks.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Services sector maintains growth momentum

The services PMI rose to 57.9 from 57.5 in March, with the services sector remaining the strongest pillar of growth over the past year, supported by urban demand.

Prices remain a concern

While activity improved, inflationary pressures stayed elevated. Firms faced higher input costs and passed on a part of the burden through increased selling prices. This may keep policymakers cautious on inflation, particularly if energy and freight costs remain volatile due to geopolitical tensions.

Strong growth momentum

The April reading indicates that India entered the new fiscal year with stronger momentum than March had suggested. If geopolitical risks ease and commodity prices stabilize, the April rebound could mark the start of a strong first quarter.