Indian Manufacturing Growth Registers Mild Recovery in April, Inflation Pressured by Iran War Tensions

India's Manufacturing Growth Sees Mild Recovery in April, Iran War Exerts Upward Pressure on Inflation

India's manufacturing sector activity witnessed a mild recovery in April, with the seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) rising from 53.9 in March to 54.7 in April. This indicates the second-slowest improvement in overall operating conditions in close to four years.

The HSBC India Manufacturing PMI is a gauge of overall conditions derived from measures of new orders, output, employment, supplier delivery times, and stocks of purchases. In the PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

The two largest sub-components of the PMI, new orders and output, rose since March but trailed readings seen in at least three-and-a-half years. Survey participants indicated that advertising and demand resilience supported sales and production, but growth was hampered by competitive conditions, the war in the Middle East, and a reluctance among clients to approve pending quotes.

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The war in the Middle East exerted upward pressure on inflation, with input costs increasing at the fastest pace since August 2022, and output prices rising at the quickest rate in six months. Firms noted better demand from clients in several countries, including Australia, France, Japan, Kenya, mainland China, Saudi Arabia, the UAE, and the UK.

Companies continued to indicate that the war in the Middle East exerted upward pressure on inflation. Input costs and output charges rose at the quickest rates in 44 and six months respectively. Average cost burdens rose further in April, with panellists often attributing hikes to the Middle East war.

In terms of employment, despite only a marginal increase in outstanding business volumes, manufacturers recruited additional workers at the start of the first fiscal quarter. The rate of job creation was marked and the strongest in ten months.

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Indian manufacturers remained optimistic towards growth prospects, but the overall level of positive sentiment slipped since March. Confidence was pinned on hopes that marketing efforts would bear fruit and that pending projects would be approved.

The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.