India’s Manufacturing Growth Slips To 3-Month Low Amid Cost Pressures: Report

The survey, compiled by S&P Global, highlighted robust growth across the sector, though the pace of expansion in output and new orders slowed

Employment in the manufacturing sector saw a significant boost, with job creation reaching a new series high

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India’s manufacturing sector saw a slight moderation in growth in May, slipping to a three-month low amid inflationary pressures, softer demand, and heightened geopolitical uncertainty, according to the HSBC India Manufacturing Purchasing Managers’ Index (PMI) released on Monday.

The seasonally adjusted PMI fell to 57.6 in May from 58.2 in April, marking the slowest pace of improvement in operating conditions since February. Despite the decline, the index remained well above the 50-point threshold that separates expansion from contraction.

The survey, compiled by S&P Global, highlighted robust growth across the sector, though the pace of expansion in output and new orders slowed. Firms attributed the ongoing growth to strong domestic and international demand, coupled with successful marketing campaigns. However, inflation in material, freight, and labour costs, combined with competitive pressures and the ongoing India-Pakistan conflict, tempered the upturn.

"India’s May manufacturing PMI signalled another month of robust growth in the sector, although the rate of expansion in output and new orders eased from the previous month. The acceleration in employment growth to a new peak is certainly a positive development," said Pranjul Bhandari, Chief India Economist at HSBC.

Hiring In The Manufacturing Sector

Employment in the manufacturing sector saw a significant boost, with job creation reaching a new series high. Of the surveyed firms, 12 per cent reported higher headcounts, with a greater emphasis on permanent hires than temporary roles.

Sustained hiring allowed manufacturers to manage workloads effectively, the survey added. Meanwhile, rising input costs prompted many companies to raise output prices to protect margins. Despite the uptick in price pressures, demand remained strong, enabling firms to pass on some of the cost burden to customers.

Export orders also continued to strengthen, growing at one of the fastest rates in three years. Respondents cited increased demand from regions including Asia, Europe, the Middle East, and the United States.

Looking ahead, manufacturers remained optimistic, with expectations of higher output over the next 12 months supported by positive market sentiment and ongoing investment in production capacity.

The HSBC India Manufacturing PMI is based on responses from around 400 manufacturers, with the panel weighted by sector and company size in line with GDP contributions.