📷 Image Credits: The Times of India
India’s manufacturing sector has experienced a slowdown in growth during the month of May, as reported by a recent business survey. The manufacturing growth in the country slowed to a three-month low due to rising temperatures, particularly a heatwave that prompted some companies to reduce working hours. However, despite this temporary setback, factory activity remained robust overall, supported by strong international sales. The HSBC final India Manufacturing Purchasing Managers’ Index, compiled by S&P Global, dropped to 57.5 in May from April’s 58.8, falling below a preliminary estimate of 58.4.
This dip in the index indicates a slowdown in the expansion of the manufacturing sector, although it is noteworthy that the index is still above its long-run average. The manufacturing sector in India has remained in expansionary territory for almost three years, staying above the 50-mark that separates contraction from expansion. While new orders and output saw a softer rise during May, new export orders actually increased at the fastest pace in over 13 years, indicating a strong demand across different geographies.
The recent data revealed by the business survey also highlighted that India’s economy expanded by a significant 7.8% year-on-year in the January-March quarter, with strong growth in manufacturing playing a crucial role. Economists anticipate that this momentum will continue throughout the year. Amidst other factors, the growth was positively influenced by upbeat demand and favourable economic conditions. Despite election-related disruptions, the output and new order PMI sub-indexes showed historically strong figures in May.
However, it was noted that prices for various materials like electronic components, packaging, plastics, and steel increased, leading to a steeper rise in both input and output prices. While inflation in India has been within the Reserve Bank of India’s target range, the manufacturing sector saw a squeeze in margins due to the inability of manufacturers to pass the full price increase on to consumers. Looking ahead, the positive sentiment among firms indicates confidence in sustained demand, leading to the fastest job additions since November 2022.
In light of these developments, the manufacturing landscape in India presents a mixed picture of challenges and opportunities. The ability to navigate through the impacts of rising temperatures, international sales growth, and inflationary pressures will be crucial for businesses operating in the sector.
