Manufacturing Activity Rises to 58.3 in June

Manufacturing activity improved in June, reaching 58.3, up from a three-month low of 57.5 in May, driven by an increase in new orders, according to a private survey released on Monday.

“The Indian manufacturing sector ended the June quarter on a stronger footing. The headline manufacturing PMI rose by 0.8 percentage points to 58.3 in June, supported by increased new orders and output,” said Maitreyi Das, global economist at HSBC.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index remained above the long-term average, boosting employment levels, which rose at the fastest pace in over 19 years.

"The consumer goods industry performed exceptionally well, with significant growth also seen in the intermediate and investment goods sectors," the report noted.

The 400 firms surveyed reported strong growth in new export orders, driven by economies in Asia, Australia, Brazil, Canada, Europe, and the US.

Commerce and Industry Minister Piyush Goyal projected that India’s goods and services exports would likely surpass $800 billion in FY25, 3% higher than the previous year.

Increased demand also led to higher prices, indicating better pricing power for firms.

Selling inflation rose to a two-year high, despite a slight easing in input prices from the previous month. However, input inflation remains above the long-term average.

"Manufacturers were able to pass on higher costs to customers, as demand remained robust, improving margins,” said Das.

Experts suggest that growth momentum will likely remain strong this fiscal year, with the country expected to grow by over 7%.

The Reserve Bank of India recently revised India’s growth forecast upward to 7.2% from the previously projected 7%.

The Indian economy expanded by 8.2% in FY24, driven by stronger manufacturing and capital expenditure growth.

"While the overall outlook for the manufacturing sector remains positive, the future output index dropped to a three-month low but still remains above the historical average,” Das noted.

Industry bodies have been calling for a greater capex push from the government compared to the interim budget to maintain momentum.

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