Key Points
Manufacturing PMI reaches 58.1, highest in eight months
Domestic orders drive strong production growth
Inventories decline fastest in three years
Business sentiment remains positive for future expansion
According to the latest HSBC India Manufacturing Purchasing Managers' Index (PMI), the sector's performance improved to an eight-month high, reaching 58.1 in March, up from 56.3 in February.
Pranjul Bhandari, Chief India Economist at HSBC, said, "India registered a 58.1 manufacturing PMI in March, up substantially from 56.3 during the previous month. Although international orders slightly slowed, overall demand momentum remained robust, and the new orders index recorded an eight-month high of 61.5."
Bhandari said, "Strong demand prompted firms to tap into their inventories, causing the fastest drop in finished goods stocks in over three years. Business expectations remained fairly optimistic, with around 30% of survey participants foreseeing greater output volumes in the year ahead, compared to less than 2% that anticipate a contraction."
The growth was driven by a sharp rise in new domestic orders, which boosted overall production levels. However, the expansion in export orders slowed slightly, though international demand remained strong, especially from markets in Asia, Europe, and the Middle East.
Due to rising demand, manufacturers used their existing stock of finished goods to meet orders, leading to the fastest decline in inventory levels in over three years. To replenish stocks and ensure continued production, companies ramped up input purchases at the fastest rate in seven months.
Despite an increase in input demand, suppliers were mostly able to meet delivery timelines, with lead times improving for the thirteenth consecutive month. Meanwhile, pre-production inventories rose at their quickest pace in five months.
Price pressures remained mixed. The cost of raw materials, including copper, electronic items, leather, LPG, and rubber, increased at a three-month high rate. However, the rise in selling prices for finished goods was slower, marking the weakest increase in a year.
Employment levels remained steady, with hiring continuing at a moderate pace. Capacity pressures among manufacturers were minimal, with only a slight increase in pending workloads.
Looking ahead, businesses remain optimistic about future growth, driven by strong customer demand and ongoing projects awaiting approval.
