India’s manufacturing activity rose to 59.1 in July, rising from 58.4 in June, signaling the strongest improvement in the health of the sector since March 2024, data released by S&P Global on Friday showed. The PMI was comfortably above its long-run average. According to the survey, manufacturing sector conditions in India continued to strengthen in July.
What led to the growth?
Pranjul Bhandari, Chief India Economist at HSBC, said, “India recorded a 59.1 manufacturing PMI in July, up from 58.4 during the prior month. This marked a 16-month high for the Indian manufacturing sector, which benefited from strong growth in new orders and output.”
The rise in new orders and output was linked by panellists to favourable demand conditions and successful marketing initiatives. Overall sales rose at the fastest pace in close to five years. According to the HSBC survey, although rising international demand from across the globe reportedly contributed to the overall upturn in total sales, new export orders increased to a lesser extent than in June. “The expansion was nevertheless among the best seen in over 14 years,” it said.
What are the headwinds at play?
According to the survey members, among the main headwinds to growth are competition and inflation concerns.
The July data showed that while firms bought extra inputs to broadly the same extent as in June, however, job creation receded to the weakest since November 2024. Meanwhile, business confidence retreated to its lowest level in three years. While the Indian manufacturers remained confident of a rise in output over the course of the coming 12 months, the overall level of positive sentiment fell to its lowest mark in three years.
In terms of job creation, the companies continued to hire extra staff at the start of the second fiscal quarter, but they did so to the least extent in eight months. Around 93 per cent of panellists indicated that employment numbers were sufficient for current requirements. Indeed, outstanding business volumes increased only marginally in July.
The start of the second fiscal quarter also saw a mild intensification of inflationary pressures. Amid reports of greater aluminium, leather, rubber and steel prices, average input costs rose at a faster pace than in June. The respective seasonally adjusted index remained below its long-run average, however. “Charge inflation quickened only fractionally from June, but the rate of increase was above that seen for input costs and its own trend,” the report stated.
On the purchasing side, goods producers sought to replenish their inventories by acquiring additional inputs. Buying levels rose at a fractionally slower pace than in June, and one that was the second-fastest in 15 months.