India’s manufacturing sector witnessed significant growth in June, with the HSBC final India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, rising to 58.3. This marks an increase from 57.5 in May, although it is slightly below the preliminary estimate of 58.5. The robust demand led to the fastest rate of hiring in over 19 years, despite ongoing inflationary pressures.
Maitreyi Das, a global economist at HSBC, commented on the sector’s performance, stating, “The Indian manufacturing sector ended the June quarter on stronger footing. While the overall outlook for the manufacturing sector remains positive, the future output index receded to a three-month low, albeit it remains above the historical average.”
Inflationary Pressures and Cost Management
The survey highlighted that inflationary pressures remained elevated, with cost prices increasing at a marginally slower pace compared to May. Despite this, manufacturers managed to pass on higher costs to customers, capitalizing on robust demand to improve their margins. “Manufacturers were able to pass on higher costs to customers, as demand remained robust, resulting in improved margin,” added Das.
Economic Outlook and RBI’s Inflation Target
According to the latest survey by news agency Reuters, inflation is expected to average near the mid-point of the Reserve Bank of India’s (RBI) target range of 2-6%, at 4.6% and 4.5% in the current and next fiscal years. The survey also indicated that the RBI is anticipated to lower its interest rate by 25 basis points to 6.25% next quarter, with another similar cut expected in the January-March quarter.
Conclusion
The rise in India’s Manufacturing PMI to 58.3 in June underscores the resilience and strength of the country’s manufacturing sector. With robust demand driving growth and employment, and manufacturers successfully managing inflationary pressures, the sector remains on a positive trajectory. However, the slight dip in the future output index suggests that careful monitoring of economic conditions and inflation trends will be crucial in the coming months.
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