India’s April manufacturing PMI sees second-best improvement in operating conditions in three-and-a-half years

India's manufacturing sector sees second-best improvement in operating conditions in three-and-a-half years, with strong growth in new orders.

India’s manufacturing sector activity moderated slightly in April, but still witnessed the second-best improvement in operating conditions in three-and-a-half years, as per the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index™ (PMI) which fell to 58.8 from the 16-year high of 59.1 recorded in March.

A reading of over 50 on the index indicates growth in activity levels. There was a sharp rise in new orders which grew at the second-strongest pace in almost 40 months, with domestic demand rising faster than export orders. Output growth eased from March but was still the second highest in 42 months.

Bolstered by current and anticipated upticks in demand, manufacturers reported higher confidence levels with expectations of higher output a year ahead. Firms hired more employees at a pace that was moderate, but still the quickest since September 2023. However, the pressure on operating capacities remained mild.

Even though input costs increased, producers ramped up input purchases to the highest level since last June, and their expansion of stock inventories was the third-strongest since early 2005 when the PMI data collection began. Expectations that demand conditions will remain conducive to growth supported inventory-building initiatives, a statement on the index said.

Price increases were reported for materials like aluminium, paper, plastics and steel, and producers raised selling prices during April at the fastest pace in three months, noting that labour costs had also gone up.

“On the price front, higher costs of raw materials and labour led to a modest uptick in input costs, but inflation remains below the historical average. However, firms passed these increases onto consumers through higher output charges, as demand remained resilient, resulting in improved margins,” said Pranjul Bhandari, chief India economist at HSBC.

The India Manufacturing PMI reading for April is milder than that signalled by the Flash PMI released on April 23 which was based on 75% to 85% of responses received from firms for the survey-based index. As per the flash reading, the manufacturing PMI was pegged at 59.1 in April, recording no change from March.