India’s manufacturing sector exhibited impressive resilience in July 2024, as reported by the HSBC India Manufacturing PMI, which recorded a robust reading of 58.1 for the month. Although this figure is slightly down from June’s 58.3, the data highlights significant growth and a substantial improvement in the sector’s health.
Despite a minor slowdown in new orders and output, the overall performance remains well above the long-term average, underscoring the sector’s continued strength. According to the report, “India’s manufacturing sector continued to post impressive growth in July, despite slightly softer increases in new orders and output. Key positive developments seen in the latest results included one of the fastest expansions in international sales for over 13 years and another robust round of job creation.”
A notable highlight of the report is the exceptional growth in international sales, which achieved its second-highest level in over 13 years. This surge in demand from clients across Asia, Europe, North America, and the Middle East has bolstered the manufacturing landscape, leading to significant job creation. The data showed that while 7% of surveyed firms reported hiring, the majority, around 92%, maintained stable headcounts, indicating a cautious approach to workforce expansion.
However, the strong demand has also increased prices. Input costs rose at one of the fastest rates in nearly two years, causing manufacturers to raise selling prices at the steepest rate since October 2013. The inflationary pressures were attributed to higher costs for essential materials such as coal, leather, and steel, along with rising labor costs.
“India’s headline manufacturing PMI showed a marginal slowdown in the pace of expansion in July, but with most components remaining at robust levels, the small drop is no cause for concern. New export orders remain a bright spot, rising by 1pt to the second-highest level since early 2011. The continuous increase in the output price index, driven by input and labor cost pressure, may signal further inflationary pressure in the economy,” said Pranjul Bhandari, Chief India Economist at HSBC.
Despite these challenges, manufacturers remain optimistic about future growth, supported by favorable demand conditions and ongoing marketing efforts. The overall sentiment towards production in the coming year has remained stable, with growth expected to be driven by marketing efforts and new client inquiries.