Demand surge fuels India's manufacturing recovery: PMI hits 4 month high

1 Feb 2024 , 12:40 PM

According to a private study released on Thursday, India’s manufacturing sector saw significant improvement at the beginning of 2024, with factory activity growing at its quickest rate in four months in January due to strong demand and a positive outlook for the coming year.

After falling to 54.9 in December, the HSBC final India Manufacturing Purchasing Managers’ Index, which is calculated by S&P Global, increased to 56.5 in January.

Although the final reading was a tad lower than a preliminary estimate of 56.9, it was comfortably above the 50-mark that separates expansion from contraction. It has been above breakeven since June 2021.

According to a recent Reuters poll, India’s economy would continue to develop at the quickest rate among major economies this year and next, supported by significant government expenditure.

Nonetheless, another Reuters poll indicated that the government’s goal will be to reduce the fiscal deficit as a percentage of GDP. The fiscal year 2024–2025 budget, which is anticipated to be unveiled later on Thursday, is anticipated to find a compromise between budgetary restraint and populist policies.

With the help of strong global demand, the PMI’s new orders sub-index surged to its highest level since September, extending the current expansion sequence to more than 2.5 years.

In response to robust demand and a positive outlook for the upcoming year, businesses increased their purchases of raw materials. A 13-month high was reached by the future output sub-index, while the fastest increase in purchases since September was seen in purchases.

However, as businesses reported having enough capacity to handle their existing workloads, there wasn’t much of a shift in employment levels from December.

Input cost inflation was growing at a negligible rate, even though it was approaching a three-month high.

Prices gradually went up as businesses transferred some of the increased expenses to customers in response to rising costs for rubber, steel, packing materials, transportation, and labour.

Even though India’s inflation in November and December was almost at the higher end of the Reserve Bank of India’s (RBI) target range of 2 to 6%, a rate cut by the RBI is not anticipated until at least July.

For feedback and suggestions, write to us at [e-mail]