New Delhi, India – India’s manufacturing sector activity growth slipped to a five-year low in July, according to the monthly HSBC India Manufacturing Purchasing Managers’ Index (PMI). The seasonally adjusted index fell from 54.2 in June to 53.5 in July, marking the lowest reading since August 2021 and falling below the long-run series average of 54.2. The decline was attributed to a slower rise in new business orders amid increasingly challenging market conditions, reduced client interest for key items, and weakening job creation.
The PMI, a gauge of overall manufacturing conditions derived from measures of new orders, output, employment, supplier delivery times, and stocks of purchases, indicated that the rate of growth in new orders was the second-weakest in over four years. Employment growth also weakened for the third straight month, recording its slowest pace in a 29-month period of uninterrupted job creation. However, there was a notable improvement in supply-chain conditions, with input lead times shortening at a near survey-record pace, suggesting that supply chain delays are continuing to unwind.
Pranjul Bhandari, Chief India Economist at HSBC, noted that manufacturers appear to be rebuilding buffers, with inventories of both inputs and finished goods increasing alongside a rise in purchasing volumes. This suggests firms are securing supply and limiting exposure to potential disruption, though renewed tensions in the Middle East have raised fresh doubts about the durability of these improvements. On the demand front, output and new export orders strengthened, pointing to resilient demand, particularly from overseas markets, with gains noted from Canada, Egypt, Indonesia, Kenya, Nepal, South Africa, Thailand, and the UAE. Meanwhile, input cost inflation moderated, but output charge inflation accelerated, indicating firms are passing through price increases to protect margins. Business sentiment also saw a mild recovery from June’s recent low, with firms expressing a positive outlook for demand and infrastructure projects.
