India's manufacturing sector has finished the first fiscal quarter on a strong note as HSBC Manufacturing Purchasing Managers' Index (PMI) rose to a 14-month high of 58.4 in June. The manufacturing PMI stood at 57.6 in May.
The report, compiled by S&P Global, noted that the June PMI figure, comfortably above the long-run average of 54.1, signals a substantial improvement in overall manufacturing health. The upswing was largely led by intermediate goods producers, even as growth slowed in consumer and capital goods categories.
The report said that manufacturers ramped up input buying at the sharpest pace in over a year and pre-production inventories rose in tandem. However, firms were also seen dipping into finished goods inventories to meet demand, as production volumes expanded at the fastest rate since April 2024.
"Robust end-demand fuelled expansions in output, new orders, and job creation. To keep up with strong demand—particularly from international markets, as evidenced by the substantial rise in new export orders—Indian manufacturing firms had to tap deeper into their inventories, causing the stock of finished goods to continue shrinking. Finally, input prices moderated while average selling prices rose as some manufacturers passed on additional cost burdens to clients," said Pranjul Bhandari, chief India economist at HSBC.
June also saw a quicker upturn in new order inflows. The rate of expansion was the strongest in close to a year. The growth of new export orders gained considerable momentum in June. The rate of expansion was the third-highest since data collection started in March 2005. Firms noted strengthening demand from across the globe, with the US mentioned more frequently.
Employment growth was another bright spot. Hiring rose at a record pace in June, mainly through short-term recruitment, in response to higher output needs and increasing backlogs of work.
On the price front, input cost inflation cooled to a four-month low, though firms still reported higher freight, labour, and metal costs. This led to a marked rise in output prices, as manufacturers passed on some of the cost burden to customers.
The report also noted improvements in supply chain performance, with average delivery times shortening to the greatest extent in five months.
Despite the strong performance, businesses expressed caution over future growth, citing concerns about competition, inflation, and changing consumer preferences. Still, the overall sentiment remained positive.
