India's Manufacturing PMI Hits 16-Year High In March

India’s manufacturing sector ended fiscal 2024 with a stellar performance with strongest increases in output and new orders since October 2020.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index climbed to a 16-year high of 59.1 in March from 56.9 in February.

Growth of new orders accelerated to the quickest in nearly three-and-a-half years during March, amid reports of buoyant demand conditions. Inflows of new work strengthened from both domestic and export markets, the latter reportedly reflecting better sales to Africa, Asia, Europe and the US.

New export orders increased at the fastest pace since May 2022.

Manufacturing output rose for the 33rd month running in March, and to the greatest extent since October 2020. Growth quickened across the consumer, intermediate and investment goods sectors. As was the case for new orders, the steepest expansion in production was seen at investment goods makers.

Quantities of purchases increased at the quickest rate since mid-2023, and one that was among the strongest in nearly 13 years, as companies built-up stocks in advance of expected improvements in sales.

After leaving payroll numbers broadly unchanged in the previous two months, manufacturers in India took on additional workers in March. The pace of job creation was mild, but the best since September 2023.

Despite remaining modest by historical standards, cost pressures were at their highest in five months. Companies reported having paid more for cotton, iron, machinery tools, plastics and steel. A very small proportion of panelists opted to increase their selling prices in March (fewer than 5%), with customer retention efforts preventing several companies from hiking their fees. Collectively, output charge inflation softened to the weakest in over a year.

The results for March provided a mixed picture regarding the outlook for the Indian manufacturing sector. Companies remained confident on average, with 28% forecasting output growth in the year ahead and 1% expecting a contraction. Planned marketing, new product enquiries and buoyant demand were all cited as reasons for optimism. The overall level of sentiment remained elevated, but slipped to a four-month low as inflation concerns weighed on confidence.