Manufacturing Activity Reaches 16-month High in July Backed by Strong Demand, Reveals PMI Data

India’s manufacturing sector grew at its fastest pace in July since March 2024, driven by strong demand and robust new orders, according to a survey released by S&P Global.

From a 58.4 in June, the HSBC India Manufacturing Purchasing Managers’ Index rose to 59.1 in July. As per the survey, the growth was triggered by a sharp surge in new orders. The index rose at the fastest rate in nearly five years, owing to “favourable market conditions and effective marketing efforts". As a result, output growth was seem at a 15-month high.

In addition to that, international demand also contributed to this rise, although export order growth moderated after hitting a 17-year high in June.

However, despite the high-performance, business confidence dipped. Companies cited mounting competition and inflation concerns as key challenges behind this. The business confidence among manufacturers dropped to a three-year low.

However, the level of optimism among manufacturers fell to its lowest since July 2022 as many companies highlighted mounting competition and inflation concerns as key challenges.

Further flagging a warning, a recent Reuters poll of independent economists pointed out persistent concerns over job creation. In June, the official unemployment rate stood at 5.6% and some economists have raised questions over the methodology used in the government’s labour data.

Additionally, inflation pressures re-emerged in July with input costs rising more sharply as firms faced higher prices for certain raw materials. In response to this, companies raised selling prices for the 10th consecutive month, taking advantage of strong demand to pass on cost pressures.

Meanwhile, the Reserve Bank of India (RBI) is expected to keep the key repo rate at 5.50% in its upcoming meeting. However, any acceleration in inflation could prompt a re-evaluation of the current monetary stance.

On the trade front, uncertainty looms as US President Donald Trump is set to impose 25% tariffs on Indian goods starting Friday, a move that could weigh on the country’s export performance in the coming months.