The Indian economy clocked a record rise in exports and the sharpest upturn in employment in nearly 18 years in May, according to HSBC Flash Purchasing Manager's Index (PMI) data released on Thursday.

The PMI data, compiled by S&P Global, indicated the third-strongest upturn in private sector output since July 2010. Although the manufacturing industry continued to lead the growth of both sales and output, it was the service economy that was responsible for the latest acceleration in overall economic expansion.

Other positive developments highlighted by May's survey included a record rise in aggregate exports, the steepest expansion in private sector jobs since 2006 and a notable improvement in business confidence. On the price front, a faster increase in input costs pushed prices charged for Indian goods and services higher.

“May saw the headline HSBC Flash India Composite* Output Index – a seasonally adjusted index that measures the month-on-month change in the combined output of India's manufacturing and service sectors – rise from a final reading of 61.5 in April to 61.7, which indicated the third-strongest rate of expansion in close to 14 years,” the survey stated.

Over this period, growth was stronger only in July 2023 and March 2024. When explaining the latest increase, survey participants cited successful advertising, efficiency gains, robust intakes of new work and demand strength, the report said.

Pranjul Bhandari, Chief India Economist at HSBC, said: "The composite PMI ticked up further in May, recording the third strongest reading in close to 14 years, supported by a sharp acceleration in the services sector. Although manufacturing sector growth slowed slightly in May, it continued to surpass that in the service economy.”

Additionally, the latest data showed strength in new export orders for both sectors, which rose at the fastest pace since the series started in September 2014, he added.