NEW DELHI: India's manufacturing sector saw a decline in the Purchasing Managers' Index (PMI), falling from 57.5 in October to 56.5 in November, marking an 11-month low. This downturn is attributed to competitive market conditions and rising inflation, which have led to slower factory orders.
The HSBC India Manufacturing PMI indicates a modest improvement in sector performance, remaining above the historical average. Pranjul Bhandari, Chief India Economist at HSBC, noted that while the PMI decreased slightly, it still reflects expansionary conditions.
International demand demonstrated significant strength, with new export orders reaching a four-month peak, contributing to ongoing manufacturing growth. However, output expansion is slowing due to cost pressures.
Recent government data revealed that India's economic growth decelerated to 5.4 percent during the July-September period, the lowest in nearly two years, impacted by underperformance in manufacturing and mining sectors, as well as reduced consumption.
Despite these challenges, the November manufacturing sector growth was supported by positive demand patterns, although businesses reported limitations due to market competition and rising costs. The survey indicated that manufacturers experienced a weaker but still robust increase in new business intakes.
Manufacturing firms implemented their most significant price increases since October 2013, passing on rising costs for freight, labor, and materials to consumers. Input prices for various intermediate goods, including chemicals and rubber, rose in November, while output prices soared to an 11-year high.
Retail inflation in India reached a 14-month peak of 6.21 percent in October, up from 5.49 percent in September, exceeding the Reserve Bank of India's (RBI) acceptable range, primarily due to increasing food costs. The RBI aims to maintain inflation at 4 percent, with a permissible variation of 2 percent.
Despite the current challenges, the survey indicates that Indian manufacturers sustained production increases due to favorable demand conditions, continuing a trend of employment growth for the ninth consecutive month. The outlook remains positive, bolstered by anticipated benefits from marketing initiatives and new product launches, alongside projected strong demand through 2025.