The latest HSBC India Manufacturing Purchasing Managers' Index (PMI) suggests the country's factories are firing on all cylinders, with production and sales growing at their fastest rates in over two years. The seasonally adjusted manufacturing PMI skyrocketed to a lofty 59.1 in March – its highest level since February 2008 – driven by a 16-year high in new work intake.
Both domestic and international demand powered the manufacturing rebound. New export orders rose at the strongest pace since May 2022 as sales to key markets like Africa, Asia, Europe and the US picked up momentum. Consumer, intermediate and capital goods makers all reported stronger inflows of new business.
The jump in production was aided by companies proactively building up their inventory stocks to meet the spike in demand. Input buying expanded sharply while job creation also returned as factories hired more workers to cope with capacity pressures.
Not surprisingly, cost inflation accelerated as manufacturers paid more for chemicals, iron, machinery, plastics and steel. However, with customer retention a high priority, companies raised their selling prices only marginally despite rising cost burdens.
The manufacturing resurgence was broad-based, with investment goods makers particularly upbeat. While inflation worries linger, the sector appears poised to sustain growth in the year ahead if demand holds up. The breakneck recovery establishes India as a global manufacturing powerhouse and strengthening consumption could accelerate this transition.
