India’s manufacturing sector braces for slow growth
Business activity in India's manufacturing sector is showing signs of improvement. The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 56.9 in February from 56.5 in January. A figure above 50 indicates expansion.
The improvement, albeit marginal, was aided by higher domestic and international orders coupled with lower input costs. In effect, the headline index hit a five-month high and was also higher than Asian peers. “New export orders rose at the fastest rate in nearly two years, with anecdotal evidence highlighting Australia, Bangladesh, Brazil, Canada, mainland China, Europe, Indonesia, the US and UAE as sources of demand growth," said the survey report.
The index gauging this component jumped to 56.7 in February from 53.7 in January. Manufacturers are seeing some respite from cost inflation, with the index measuring input price trends continuing to decline in February. Additionally, the input price index was lower than the output price index, suggesting that manufacturing firms are enjoying pricing power.
Recall that in December 2023, the headline manufacturing PMI had sunk to an 18-month low of 54.9. Against that backdrop, this recovery is positive and is driving optimism among Indian manufacturers regarding the production outlook. The Future Output Index gauging business confidence stood at an elevated 66.3 in February.
However, despite the upbeat mood, there can be some hurdles. India’s manufacturing gross value added data for the December quarter, showed an 11.6% year-on-year growth. This was driven by margin improvement and a low base, with volume growth moderating in the quarter.
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