India's Composite PMI Climbs to a 14-Month High in June: Report This boom in demand, both domestic and international, has stretched existing capacities. Indian firms have now reported rising backlogs for 42 consecutive months.

India's private sector posted its sharpest expansion in over a year this June, fueled by a surge in new business, according to data compiled by S&P Global. The HSBC flash India composite output index climbed to a 14-month high of 61, up from 59.3 in May, indicating strong month-on-month growth in both manufacturing and services sectors.

The standout story from the report is the strength of export orders. International sales increased at the fastest pace since S&P Global began collecting comparable data in September 2014. Manufacturing firms led this surge, while service providers also recorded a notable, although slower, uptick in overseas demand. The expansion in exports was widespread, with demand strengthening from Asia, Europe, the Middle East, and the Americas.

This boom in demand, both domestic and international, has stretched existing capacities. Indian firms have now reported rising backlogs for 42 consecutive months. In June, these backlogs increased at a pace higher than May and slightly above the long-run average, reinforcing the pressure on operations across sectors. To manage this, businesses expanded their workforce. According to the report, June saw increased hiring across both full and part-time roles, with manufacturing companies marking a peak in employment growth.

"India's flash PMI indicated strong growth in June," said Pranjul Bhandari, chief India economist, HSBC. "New export orders continued to fuel private sector business activity, especially in manufacturing. Meanwhile, the combination of robust global demand and rising backlogs prompted manufacturers to increase hiring. Employment growth is also healthy in the services sector despite slightly weakening on a sequential basis from May to June."

The HSBC Flash India Manufacturing PMI rose from 57.6 in May to 58.4 in June, its highest level since April 2024, while services activity also picked up, hitting a ten-month high. This broad-based momentum reflects a combination of favourable demand trends, improved operational efficiencies, and investments in technology, as reported by survey respondents.

Input cost inflation remained under control. June marked the slowest increase in input prices in ten months, with companies citing moderate rises in labour and metal costs. Output prices also rose, but the pace of inflation softened from the six-month high recorded in May. Service providers, in particular, held back from price hikes in an effort to remain competitive, while manufacturers sustained a stronger pace of output price increases.

Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat, contextualized the macroeconomic landscape influencing business sentiment. "The RBI MPC decisions on interest rates are based on the need to address the growth and inflation dynamics with a focus on keeping overall financial stability," he noted. "Given that the inflation trajectory has been showing a downward trend, it was important to focus on the growth variable… It was imperative to front load the rate cuts with an intent to revive the animal spirits in the economy."

Iyer emphasized that this shift signals that future policy will be data-dependent rather than guided by predefined trajectories.

Despite the strength of the data, business confidence for the year ahead dipped slightly, falling to its lowest point in over two years. The decline was driven by a downgrade in sentiment among service providers, though manufacturers showed a mild improvement in optimism. Still, overall sentiment remained broadly in line with long-run trends.