India's Purchasing Managers' Index (PMI) rebounded to 57.5 in October, rising from 56.5 in September, according to the HSBC India Manufacturing PMI survey conducted by S&P Global. This increase, reflecting a recovery from an eight-month low in September, is driven by a rise in both total new orders and international sales, contributing to the overall output growth.
India's PMI surged to a 16-year high of 59.1 in March 2024, following increases from 56.9 in February, 56.5 in January, and an 18-month low PMI of 54.9 in December 2023. A PMI score above 50 signifies growth in activity, whereas a score below 50 reflects a decline.
The survey revealed that the improvement in performance was driven by heightened demand for Indian products. Companies reported a faster rise in order book volumes, surpassing the average growth observed over nearly two decades of data collection.
“New export orders also exhibited stronger growth, following the weakest uptick in a year-and-a-half during September. Panel members reported gains in new contracts from Asia, Europe, Latin America and the US,” it adds.
In October, increased production volumes were driven by a more rapid growth in the consumer and investment goods sectors. Input price inflation accelerated to a three-month high, although it remained below the long-term average. At the same time, output prices rose at a robust pace that exceeded the series trend. Companies surveyed identified freight, labour, and materials as the main contributors to price pressures.
The survey indicates that manufacturers not only increased their hiring of additional staff at the beginning of the third fiscal quarter but did so to a larger extent than in September. Approximately one in ten panellists noted an increase in employment, while 1% reported job losses. This contributed to the first decrease in backlogs in more than a year.
“Indian manufacturers became more optimistic regarding future output volumes. Rising since September, the level of positive sentiment was above the average seen over the 13-and-a-half-year series history,” it adds.
Pranjul Bhandari, chief India economist at HSBC, highlights that India's headline manufacturing PMI increased due to improvements in the economy's operating conditions. “Rapidly expanding new orders and international sales reflect strong demand growth for India’s manufacturing sector. Meanwhile, input and output prices are both increasing as a result of persistent inflationary pressures in materials, labour, and transportation costs. To start the third fiscal quarter, business confidence is also very high due to expectations of continued strong consumer demand, new product releases, and sales pending approval,” says Bhandari.
India's inflation rose to 5.49% in September, reaching a nine-month high largely due to increased food prices and approaching the upper limit of the Reserve Bank of India's (RBI) target range of 2-6%.
