India's Manufacturing Sector Rebounds, Masking a Near 4-Year Low

India’s manufacturing sector is growing. HSBC’s India Manufacturing Purchasing Manager’s Index (PMI) jumped from 53.9 in March to 54.7 in April according to S&P Global survey. 

This sounds healthy on paper, but it’s the second weakest improvement in nearly four years. Hiding behind these numbers is a price shock that hasn’t been seen since August 2022. 

PMI, the weighted average of new orders, output, employment, supplier’s delivery times and stocks of purchases, disappointed slightly, coming in at 54.7 which was below the Flash India Manufacturing PMI estimate of 55.9 released last month.  

On the bright side, India’s manufacturing sector has now stayed above the 50-point expansion threshold for 54 straight months, underlining the sector’s resilience despite mounting cost pressures. 

Also Read: Optimizing Production Processes for Zero-Defect Auto Manufacturing 

What causes this slowdown? It’s the conflicts in the West Asian Countries hiking up the cost of Aluminum, Fuel, Petroleum Products and Rubber surging through Indian Factory gates. “Spillovers from the West Asia conflict are becoming more evident, particularly through inflation — input costs increased at the fastest pace since August 2022, and output prices rose at the quickest rate in six months,” Pranjul Bhandari, chief India economist at HSBC, said. 

On the bright side, the export orders hit a 7-month high. Job creation is also at its strongest in ten months, with firms citing active expansion plans as the driving force behind new appointments. But with clients increasingly hesitant to sign off pending orders, the critical question is how long Indian manufacturers can remain resilient. 

This optimism was short lived due to the surge in input costs. According to S&P Global survey, the overall rate of inflation rose to its highest since August 2022 and subsequently the goods producers lifted their fees to the greatest extent in six months.  

Consumer goods were the only subsector to record a slowdown in cost inflation, though its rate of increase still outpaced all other categories — and it topped the rankings for output charge inflation. 

Raw material purchases expanded in April, though the pace of procurement slowed down to the weakest in nearly two-and-a-half years, suggesting cautious inventory management amid rising prices.