New Delhi:Despite subdued hiring trends and low business confidence, India’s manufacturing activity hit a 16-month high of 59.1 in July and stayed on a strong footing entering the second half of the current fiscal. However, inflation concerns and competitive pressures could weigh on the sector’s momentum going forward, a private survey showed on Friday.
The survey, however, showed that the seasonally-adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose from 58.4 in June to 59.1 in July, signalling the strongest improvement in the health of the sector since March 2024. In the PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.
Commenting on the survey, Pranjul Bhandari, chief India economist at HSBC, said that India’s manufacturing PMI of 59.1 in July marked a 16-month high for the Indian manufacturing sector, which benefited from strong growth in new orders and output. “At the same time, however, business confidence fell to its lowest level in three years due to concerns over competition and inflation,” Bhandari said.
The survey also said that 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. “Indeed, input and output prices in India’s manufacturing sector both remained elevated during July. Amid softening business confidence, Indian manufacturers hired extra staff at the slowest rate since November 2024,” Bhandari added.
As per the survey, the overall sales rose at the fastest pace in close to five years. “Subsequently, production growth strengthened to a 15-month high in July and outpaced the series trend. Indian manufacturers remained confident of a rise in output over the course of the coming 12 months, but the overall level of positive sentiment fell to its lowest mark in three years,” the survey said.
On the price front, the survey also said that cost pressures intensified in the July month. “Amid reports of greater aluminium, leather, rubber and steel prices, average input costs rose at a faster pace than in June. According to panel members, favourable demand conditions facilitated upward adjustments to their fees,” the survey added.