With India’s manufacturing Purchasing Managers’ Index (PMI) surging to a 16-year high of 59.1 in March, Barclays estimated a moderated growth in Q1 24 from Q4 23, while forecasting the full year FY23-24 growth of 7.8 per cent driven by expansion in recent quarters.
“Momentum in hard data is more mixed: growth in the core infrastructure index declined m/m (nsa basis) in February, with the elevated y/y print (6.7 per cent) driven entirely by a low base. However, other indicators, including vehicle production and sales, continued to grow at double digit rates. We expect growth to moderate in Q1 24 from Q4 23, but we forecast full-year FY23-24 growth of 7.8 per cent on the expansion in recent quarters. For FY24-25, we expect continued strength in GDP growth at 7 per cent,” the report stated.
According to the HSBC India Manufacturing Purchasing Managers’ Index, compiled by S&P Global, the March numbers climbed to a 16-year high on the back of the strongest increases in output and new orders since October 2020, parallel to the second-sharpest upturn in input inventories in the history of the survey.
India’s manufacturing PMI continued its expansion trend and rose to the highest level since March 2008. India’s flash manufacturing PMI (59.2), released earlier and based on 75-80 per cent of survey responses, had already indicated that manufacturing activity grew at a faster pace than in February. In line with the past trends, Barclays said, the rise in headline PMI was driven by increases in output and factory orders. “The output PMI rose 2.6pts to 63.3, while the new orders PMI rose markedly, by 3.3pts to 64.0, supported by buoyant demand conditions. The sequential increase in export orders was relatively soft (+0.2pts), but it followed a sharp 3.0pts rise, which kept the index elevated (56.9),” it said. Employment PMI, meanwhile, rose to 51.8, indicating hiring increased in March.
Further, input costs rose in March, with the input price PMI increasing 1.7pts, to 51.9 during the month. Even as input price PMI has remained above 50 (indicating inflation), it has been volatile in recent months, with no clear trend emerging in one direction, and so the increase in input price PMI cannot be interpreted as rise in input cost pressures. “The pace of increase in selling prices was still muted though, as the output price PMI fell 0.4pts in March, suggesting any increase in cost pressures on firms is not being passed through to selling prices, with customer retention being the priority for surveyed firms,” the report stated.
