The growth of India’s manufacturing sector hit a 12-month low in December, with new business orders and production expanding at a more moderate pace, according to a monthly survey released on Thursday.
The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) recorded 56.4 in December, a slight dip from 56.5 in November. Despite this decrease, the PMI remained well above the long-term average of 54.1, indicating robust growth. For context, a PMI score above 50 signifies expansion, while below 50 indicates contraction.
“India’s manufacturing activity wrapped up a strong 2024 on a softer note, showing a modest slowdown in the industrial sector. The expansion rate of new orders was the year’s slowest, hinting at a potential slowdown in future production growth,” commented Ines Lam, Economist at HSBC. The manufacturing sector faced challenges from heightened competition and price pressures, but new export orders saw a significant boost, growing at the fastest pace since July.
While overall new business grew at a slower rate, the pace of export growth accelerated as firms secured international orders from various global markets. This substantial growth spurred further increases in purchasing levels and employment within the sector.
Continued improvements in new work intakes encouraged manufacturers in India to procure additional inputs and ramp up staffing. About one in ten companies hired extra staff, whereas fewer than 2% reduced their workforce.
On the pricing front, container, material, and labor costs have increased since November, leading to higher overall expenses for Indian manufacturers. Despite this, the rate of input price inflation remained moderate by historical standards.
S&P Global compiles the HSBC India Manufacturing PMI from responses to questionnaires sent to purchasing managers at approximately 400 manufacturers.
Looking forward to 2025, Indian manufacturers are optimistic about rising output. “Optimism was fueled by advertising, investment, and expectations of favorable demand, though concerns about inflation and competitive pressures tempered sentiment,” the survey concluded.
