Manufacturing Activity Strengthens In Oct On Rise In New Orders Amid GST Reform, Healthy Demand: PMI

India's manufacturing sector activity strengthened in October, buoyed by Goods and Services Tax relief, productivity gains and tech investment, even as international sales rose at a weaker pace, a monthly survey said on Monday.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose from 57.7 in September to 59.2 in October, indicating a quicker improvement in the sector's health.

In the Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

"India's manufacturing PMI accelerated to 59.2 in October, up from 57.7 during the month prior. Robust end-demand fuelled expansions in output, new orders, and job creation," said Pranjul Bhandari, Chief India Economist at HSBC.

The pick-up in sales growth mainly stemmed from the domestic market, as new export orders increased at a softer rate, the survey said.

New orders increased further at the start of the third fiscal quarter, with companies attributing growth to advertising, buoyant demand and the GST reform. Moreover, the pace of expansion was sharp and stronger than that recorded in September.

Manufacturers continued to purchase additional raw materials and semi-finished items in October, reportedly to supplement production and build inventories amid softening of cost inflation.

On the price front, even though there was a modest and softer increase in input costs, the rate of inflation matched September's near 12-year high.

"... Input prices moderated in October, while average selling prices increased as some manufacturers passed on additional cost burdens to end-consumers," Bhandari added.

Meanwhile, job creation entered its twentieth consecutive month in October. The rate of expansion was moderate and broadly similar to September.

Regarding the outlook, manufacturers attributed positive expectations to GST reform, expanded capacities and marketing efforts. They also predicted demand resilience and hoped that pending contracts will be approved.

"Looking ahead, future business sentiment is strong due to positive expectations around GST reform and healthy demand," Bhandari said.

The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.