India's Manufacturing PMI Rises To 56.9 In February, Highest In Five Months

India reported a robust 8.4 per cent expansion in the October-December quarter, with manufacturing playing a significant role in this growth

This marks the 32nd consecutive month that India's manufacturing PMI has remained above the 50-mark, indicating expansion rather than contraction.

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India's manufacturing industry experienced vigorous expansion in February, reaching its highest pace of growth in five months, according to a private survey conducted by HSBC and S&P Global. According to Reuters, the HSBC final India Manufacturing Purchasing Managers' Index (PMI) climbed to 56.9 last month, surpassing January's 56.5 and exceeding the preliminary estimate of 56.7.

This marks the 32nd consecutive month that India's manufacturing PMI has remained above the 50-mark, indicating expansion rather than contraction.

India, Asia's third-largest economy and the world's fastest-growing major economy, reported a robust 8.4 per cent expansion in the October-December quarter, with manufacturing playing a significant role in this growth.

Ines Lam, economist at HSBC, highlighted that both domestic and external demand supported the strong production growth in the manufacturing sector. Moreover, improved margins were noted as input price inflation dipped to its lowest since July 2020.

Buoyant demand drove output and new orders sub-indexes to five-month highs. Enhanced technology and increased sales contributed to greater output volumes, resulting in increased production.

Global demand witnessed robust improvement, reaching its highest level in nearly two years. Demand surged from various countries and regions, including Australia, China, the US, and the UAE.

While optimism for the year ahead slightly cooled, the future output index remained positive. However, this positive outlook did not translate into increased employment within the sector, as survey participants reported sufficient staff for current workflows.

Cost pressures rose at their weakest pace since mid-2020, amidst a strong business outlook and muted inflationary pressures. Firms responded by building up stocks of raw materials, leading to a substantial increase in the quantity of purchases sub-index, reaching its highest level in five months.

Furthermore, the output price index eased to its lowest level since March 2023, indicating a reduction in inflationary pressures. With growth remaining strong and inflation within the target range of 2-6 per cent, the Reserve Bank of India (RBI) is expected to maintain interest rates until at least July, as suggested by a Reuters poll.

Overall, India's manufacturing sector continues to show resilience and strength amid global economic dynamics, positioning itself as a key driver of the country's economic growth.