India's Manufacturing Sector Shows Resilience Amid Challenges

In November, India's manufacturing sector remained robust despite price pressures and competition, with the PMI at 56.5. Strong domestic and international demand, alongside escalated costs, influenced the sector's growth. Export orders rose, workforce expansion continued, and input purchasing reflected preparation for future demand.

India's manufacturing sector defied economic challenges in November, demonstrating resilience despite price pressures and intense competition. The HSBC India Manufacturing Purchasing Managers' Index (PMI) dipped to 56.5 from 57.5 in October, marking an 11-month low. However, the index stayed above the long-term average, indicating continued expansion.

Positive demand trends drove sales and output growth, though market competition and rising costs moderated expansion. Input cost inflation surged, leading manufacturers to hike output prices, reaching levels not seen since October 2013, as the cost of chemicals, cotton, leather, and rubber soared.

Pranjul Bhandari, HSBC's Chief India Economist, remarked that India's manufacturing PMI remained firmly in expansion territory, supported by strong international demand. New export orders hit a four-month high, while rising input, labor, and transportation costs pressured output expansion rates. Input prices for intermediates climbed, transferring costs to consumers.

Inflationary pressures affected domestic sales, but international demand climbed, with export orders from countries such as Italy, UK, Bangladesh, China, and the US. The manufacturing sector expanded its workforce for the ninth month running, with robust job creation including both permanent and temporary hires.

In response to future demand, input purchasing stayed strong as manufacturers built inventories despite slowing buying rates. Supplier performance improved, resulting in shorter lead times.

(With inputs from agencies.)