India’s Manufacturing Growth Declines to Near 5-Year Low, Yet HSBC PMI Remains in Expansion Zone

India’s manufacturing sector experienced its slowest growth in nearly five years in July, according to the latest HSBC India Manufacturing Purchasing Managers’ Index (PMI) data. The seasonally adjusted PMI fell to 53.5, down from 54.2 in June, marking the lowest level since August 2021. Despite this decline, the index remains above the 50-point threshold, indicating that manufacturing conditions are still improving.

Decoding the Numbers

The survey revealed that while demand remained resilient, the growth rate for new orders, input purchases, and hiring slowed during the month. Manufacturers benefited from sustained demand, which supported further output expansion in July. However, metrics such as total sales, input purchasing, and employment showed signs of cooling.

Despite weaker domestic demand, export orders saw an uptick, with manufacturers reporting increased sales to countries including Canada, Egypt, and the UAE. Factory output continued to rise, although the pace of growth was among the slowest since mid-2022. The survey also indicated that Indian manufacturers were replenishing inventories as supply chain conditions improved, with delivery times for inputs shortening significantly.

Pranjul Bhandari, Chief India Economist at HSBC, noted that improvements in supply chain delays are encouraging, although renewed tensions in the Middle East could pose challenges. She highlighted that while output and new export orders strengthened, input cost inflation moderated, and firms began passing on price increases to protect margins.

The report indicated that employment growth slowed for the third consecutive month, with hiring at its weakest pace in 29 months. Input cost inflation eased to a five-month low, although transportation costs remained high. Business confidence improved from June’s low, driven by optimism over stronger demand and increased client inquiries. The HSBC India Manufacturing PMI is compiled by S&P Global based on responses from approximately 400 manufacturing companies across India.

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