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India’s manufacturing sector activity surged in March with new orders and output levels rising at the fastest pace since October 2020, lifting the HSBC India Manufacturing Purchasing Managers Index (PMI) to a 16-year high of 59.1 from 56.9 in the previous month. A reading of over 50 on the index indicates growth in activity levels.
Export orders also grew at the fastest pace since May 2022, and though pressures on current capacity remained mild for producers, they resumed job creation after a two-month pause. While the scale of new jobs created was mild, it marked the best uptick in six months, with firms hiring mid-level and full-time employees.
While output growth quickened across the consumer, intermediate and investment goods sectors, the steepest expansion in production and new orders was seen at investment goods makers, as per the survey-based index findings.
Though input costs rose at the highest pace in five months during March, most producers refrained from passing on costs to buyers, resulting in output prices rising at the slowest pace in a year. In fact, less than 5% of surveyed firms opted to increase selling prices as the focus was on retaining customers. Firms also stocked up on input inventories at a pace that is the second-sharpest since the PMI surveys started, with the most stockpiling seen in capital goods
Despite the broadly positive trends, the overall outlook for the manufacturing sector was mixed, with sentiment levels among firms slipping to a four-month low. Just 28% firms expect output to grow in the year ahead while 1% expected a contraction, as worries about inflation weighed down confidence levels.
Noting that India’s March manufacturing PMI rose to its highest level since 2008, HSBC economist Ines Lam said that manufacturing companies expanded hiring in response to strong production and new orders. “On the back of strong demand and a slight tightening in capacity, input cost inflation picked up in March,” he added.