HSBC: India’s Manufacturing Growth Sustained, Promising Outlook Ahead

India has seen impressive growth in its manufacturing sector and the month of April had also started on a strong note demonstrating the Second Most Rapid Progress in India’s Manufacturing Sector in three and a half years.

According to the HSBC PMI (Purchasing managers index) data, the stark rise in demand from the market has fuelled it, the firms have also been scaling up production and there is a sharp increase  in new business intakes.

The index underscores a notable expansion in input stocks, reaching levels unprecedented in over 19 years of data collection. This surge in stockpiling was bolstered by manufacturers’ optimistic expectations of sustained demand growth.

Despite a slight decrease compared to the previous month, the HSBC India Manufacturing Purchasing Managers’ Index (PMI) for April remained above the neutral mark of 50.0, signaling continued robustness in the sector.

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“April’s manufacturing PMI recorded the second fastest improvement in operating conditions in three-an-a-half years, bolstered by strong demand conditions which resulted in a further expansion of output, albeit slightly slower than in March,” said Pranjul Bhandari, Chief India Economist at HSBC.

In April, manufacturers responded to rising demand by increasing their workforce, marking the fastest pace of job creation since September 2023. However, pressure on operational capacities remained modest, with a slight uptick in outstanding business volumes. New export orders saw an uptick, but domestic markets remained the primary growth driver, with both local and international clients contributing to a sharp rise in total new orders.

Despite some cost pressures, inflation rates remained below long-term averages. Certain materials like aluminium, paper, plastics, and steel saw price hikes, prompting Indian manufacturers to raise selling prices, resulting in a three-month high in charge inflation.

The robust output growth can be attributed to sustained demand improvements and favorable economic conditions, which although slightly eased since March, remained strong. Indian manufacturers are optimistic about future output levels, driven by high business confidence and anticipated demand. Moreover, they see opportunities for growth through advertising and brand recognition efforts.

“On the price front, higher costs of raw materials and labour led to a modest uptick in input costs, but inflation remains below the historical average,” said Pranjul.
Overall, the data reflects a positive outlook for the Indian manufacturing sector, driven by robust demand dynamics, strong output growth, and optimistic business sentiment.

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