India’s manufacturing sector gained momentum in October after three months of slowdown, driven by a notable improvement in demand. This uptick has positively influenced job creation and bolstered business confidence, as highlighted in a recent survey.
According to the HSBC final India Manufacturing Purchasing Managers’ Index (PMI) by S&P Global, the index rose to 57.5 in October from 56.5 in September, which had marked an eight-month low. This figure also surpassed an initial estimate of 57.4. “India’s manufacturing PMI surged significantly in October, reflecting broadly improving operating conditions,” stated Pranjul Bhandari, HSBC’s chief India economist.
“New orders and international sales growth indicate strong demand for India’s manufacturing sector,” Bhandari added.
Both output and new orders hit a three-month peak, signaling heightened demand, with international demand recovering from a previous low in September. Rising demand for Indian goods saw orders from regions like Asia, Europe, Latin America, and the U.S., boosting the outlook for the coming year.
“Business optimism is high, driven by expectations of sustained consumer demand, upcoming product launches, and pending sales approvals,” Bhandari further noted.
With demand surging, companies ramped up hiring, marking the eighth consecutive month of employment growth. This trend may ease pressure on the government, which faces challenges in creating well-paid jobs for new workforce entrants. However, economists project moderate job creation over the next year, as per a recent Reuters survey.
Inflationary pressures rose, with input and output prices climbing. Input costs hit a three-month high due to increased material expenses, wage demands, and transportation fees, leading firms to pass these costs to clients more quickly than in September.
India’s inflation reached 5.49% in September, nearing the RBI’s 2-6% target range and primarily driven by rising food prices. Despite this, a recent Reuters survey indicated that a slim majority of economists expect the RBI to cut interest rates in December from the current 6.50% to 6.25%.