India's manufacturing sector declines to 11-month low

NEW DELHI: India's manufacturing sector declined from 57.5 in October to 56.5 in November, reaching an 11-month low, due to competitive market conditions and increasing inflation amidst slower factory orders, according to a recent monthly survey.

The HSBC India Manufacturing PMI indicated a more modest improvement in sector performance, while remaining above its historical average.

"India recorded a 56.5 manufacturing PMI in November, down slightly from the prior month, but still firmly within expansionary territory," Pranjul Bhandari, Chief India Economist at HSBC said.

The report further mentioned that International demand showed significant strength, with new export orders reaching a four-month peak, contributing to sustained manufacturing growth. However, output expansion has begun to slow due to increasing cost pressures.

Recent government data revealed that India's economic growth decelerated to 5.4 per cent during July-September, marking a near two-year low, attributed to underperformance in manufacturing and mining sectors, alongside reduced consumption.

The November manufacturing sector growth was sustained by positive demand patterns, although businesses reported growth limitations due to market competition and cost pressures.

"Goods producers experienced a weaker, albeit still robust, upturn in new business intakes during November," the survey stated, adding that growth was "stymied by fierce competition and price pressures".

Manufacturing firms implemented their most substantial price increases since October 2013. Survey respondents indicated that increased expenses for freight, labour and materials were transferred to customers.

"Input prices for a variety of intermediate goods - including chemicals, cotton, leather, and rubber - rose in November, while output prices soared to an 11-year high as rising input, labour, and transportation costs were passed on to consumers," Bhandari said.

Meanwhile, retail inflation in India reached a 14-month peak of 6.21 per cent in October from September's 5.49 per cent, exceeding the RBI's acceptable range, primarily due to increasing food costs. This marks an increase from

The government has tasked the central bank with maintaining inflation at 4 per cent, with a permissible variation of 2 per cent above or below. The RBI anticipates retail inflation to settle at 4.5 per cent in the ongoing fiscal year.

Additionally, the survey reveals that Indian manufacturers sustained production increases due to favourable demand conditions. The manufacturing sector continued its employment growth trend in November, marking the ninth consecutive month of expansion.

Future outlook appears positive, supported by anticipated benefits from marketing initiatives and new product launches. Confidence is further bolstered by recent expansions in production capacity and projected strong demand through 2025.

The HSBC India Manufacturing PMI data was gathered by S&P Global through questionnaires distributed to a panel of approximately 400 manufacturing purchasing managers.