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India’s manufacturing sector has recorded growth in July that is supported by increase in new orders and output as domestic sector demand conditions become favourable.

The seasonally-adjusted HSBC India Manufacturing Purchasing Managers’ Index, a monthly survey, showed a 16-month high of 59.1 in July as against 58.4 in June. This has been the country’s manufacturing sector’s strongest health improvement marker since March, 2024.

When the Purchasing Managers' Index (PMI) crosses 50, it means there has been expansion, whereas anything below 50 shows contraction in the sector.

 

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"India recorded a 59.1 manufacturing PMI in July, up from 58.4 during the prior month. This marked a 16-month high for the Indian manufacturing sector, which benefited from strong growth in new orders and output," said Pranjul Bhandari, Chief India Economist at HSBC.

The overall sales rose the fastest in five years, revealed the survey, leading to a 15-month high in production which outpaced the series trend.

Manufacturers are now confident of rising output over the next 12 months, despite the overall level of positive sentiment falling to its lowest in three years.

Bhandari, while explaining this, said that business confidence had indeed fallen to its lowest level in three years due to concerns over completion and inflation.

Meanwhile, companies continued to hire extra staff at the start of the second fiscal quarter, even though it was done to the least extent in eight months.

"Amid softening business confidence, Indian manufacturers hired extra staff at the slowest rate since November 2024," Bhandari said.

The main challenges to growth remain competition and inflation, besides cost pressures, which intensified in July.

Amid reports of greater aluminium, leather, rubber and steel prices, average input costs rose at a faster pace than in June.

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.