New Delhi, Jan 24 : India’s manufacturing sector witnessed robust growth in January, driven by a surge in new export orders and a proactive restocking spree worldwide, according to the HSBC flash Purchasing Managers’ Index (PMI) released on Friday. The report underscores the sector’s resilience and ability to adapt to global economic shifts, highlighting a promising trajectory for India’s industrial backbone.
A comprehensive analysis of 100 activity indicators revealed improved growth momentum in the quarter ending December 2024. The data showed that 65 percent of indicators reflected positive growth, a substantial jump from the 55 percent recorded in the preceding quarter as reported by IANS.This trend showcases the country’s efforts to bolster its economic framework and adapt to dynamic market conditions.
While the manufacturing sector thrived, the services sector showed a slight dip in PMI compared to last month. Experts believe this divergence stems from tariff-related concerns, which are influencing global trade patterns. “We find that new export orders for manufacturers rose more sharply than domestic or service orders, likely reflecting a global push for restocking ahead of anticipated tariffs. This has prompted manufacturers to swiftly ramp up output,” the report noted.
Cost Pressures Ease for Manufacturers, Remain a Challenge for Services
A closer look at input costs revealed contrasting trends. Manufacturers benefited from a decline in input prices, which reached a ten-month low, thereby improving their profit margins. In contrast, service providers faced a sharp rise in input costs, marking the fastest increase since August 2023. As a result, service providers raised their prices, but the increase was insufficient to offset the surge in costs, putting pressure on their margins.
The divergence in cost trends highlights the need for targeted policy interventions to ensure both sectors can sustain growth. Nevertheless, the overall economic environment is buoyed by easing inflationary pressures, with inflation expected to drop to 4.2 percent in January. This provides a conducive environment for monetary policy adjustments aimed at further stimulating growth.
Policy Implications: Rate Cuts on the Horizon
The report signals a likely easing of monetary policy, with HSBC forecasting two repo rate cuts of 25 basis points each in February and April. These cuts would bring the repo rate down to 6 percent, reflecting the government and Reserve Bank of India’s commitment to fostering economic stability and driving growth.
The HSBC flash PMI, which offers an early glimpse into monthly economic activity, is based on 80-90 percent of PMI survey responses. This advance indicator sets the tone for final Manufacturing, Services, and Composite PMI data, which are closely monitored by policymakers and industry leaders.
India’s manufacturing sector’s strong performance reaffirms the government’s focus on bolstering the nation’s industrial base, encouraging export-oriented growth, and navigating global economic uncertainties with strategic foresight.
