India's private sector growth slows to 5-month low in October
What's the story
India's private sector growth has slowed down to a five-month low in October, according to a recent survey. The decline is attributed to weaker demand and rising output prices, which have affected business optimism. The latest India Composite Purchasing Managers's Index (PMI), compiled by S&P Global and published by HSBC, fell to 59.9 this month from September's final reading of 61.
Growth indicators
PMI remains well above 50-mark
Despite the drop in October, the PMI remains well above the 50-mark that separates expansion from contraction. The overall index, which measures month-on-month changes in India's manufacturing and service sectors' output, was mainly dragged down by a slowdown in services growth. This comes even as manufacturing activity has recovered from a four-month low recorded last month.
Sectoral performance
Manufacturing activity recovers from 4-month low
The flash manufacturing PMI rose to 58.4 from last month's 57.7, indicating a recovery in this sector. However, the services business activity index slipped to 58.8 from last month's 60.9, contributing to the overall slowdown in private sector growth for October. An overall new orders sub-index expanded firmly but at its weakest pace since May due to a loss of growth momentum in the services sector and slightly quicker rise for goods producers than September levels.
Demand trends
International demand for Indian goods, services softens
International demand for Indian goods and services has softened to its weakest in seven months. This is mainly due to a slower increase in manufacturing exports. The decline comes as India faces steep tariffs on its exports to the United States, with President Trump reiterating that these tariffs will remain high unless New Delhi stops purchasing Russian oil.
Trade impact
RBI notes sharp decline in exports to US
A monthly bulletin released by the Reserve Bank of India (RBI) noted that while merchandise trade remained resilient overall, there was a sharp decline in exports to the US in September. This decline was observed as higher tariffs were implemented. Cost pressure eased across both sectors due to a reduction in goods and services tax (GST) last month. However, firms refrained from passing these benefits on to customers and raised selling charges instead.