India's manufacturing sector faced its slowest growth in 11 months during November, as rising input costs and weakening domestic demand created hurdles for sustained momentum.
However, a surge in export orders offered a glimmer of hope amid these challenges.
The HSBC India Manufacturing Purchasing Managers Index (PMI), compiled by S&P Global, stood at 56.5 in November. This marked a decline from 57.5 in October and matched the September level.
While the reading remained comfortably above the 50-point threshold that signals expansion, it fell short of the preliminary flash estimate of 57.3. The data indicates a slower rise in factory orders and production compared to earlier months.
Despite the dip, the PMI has consistently stayed above its long-term average for nearly three years. This reflects the resilience of India's manufacturing sector, even as it faces mounting pressures. The survey is based on responses from approximately 400 manufacturers across the country, offering a detailed snapshot of the industry's health.
The growth in new orders continued in November but at a pace that was the second weakest in almost a year. According to the survey, demand conditions remained supportive but were challenged by fierce competition and heightened price pressures.
Input costs surged at their fastest pace since July, driven by price increases for chemicals, cotton, leather, and rubber. These rising costs prompted manufacturers to raise output prices at the sharpest rate since October 2013. Additional expenses for freight, labour, and materials were passed on to customers, creating additional strain on domestic demand.
Amid domestic challenges, international markets provided a significant boost. Export orders saw their strongest growth in four months, with Indian manufacturers reporting increased demand from countries such as Bangladesh, China, Italy, Japan, and the United States.
This broad-based international demand helped sustain overall growth in the manufacturing sector despite domestic constraints.
Pranjul Bhandari, Chief India Economist at HSBC, highlighted the dual impact of international demand and rising costs on the sector. She noted that robust export orders were a key driver of growth, while intensifying price pressures tempered the pace of output expansion.
Input costs for intermediate goods such as chemicals and cotton saw notable increases, with output prices reaching an 11-year high.
Looking ahead, the Reserve Bank of India (RBI) has maintained its GDP growth projection for FY25 at 7.2%. The central bank expects rural and urban demand to strengthen further, supported by a favourable monsoon forecast and rising consumer confidence.
Seasonal boosts from festive periods and robust agricultural output are also likely to contribute to economic momentum.
The survey revealed that manufacturers continued to replenish their input stocks in November, with stock accumulation rates surpassing long-term averages. However, the pace of stock-building was the slowest recorded in 2024.
Additionally, the prolonged decline in finished goods inventories, which had persisted since August 2017, came to an end during the month.
India has set ambitious targets for its economic growth, aiming to become a $10 trillion economy within the next decade. The manufacturing sector is seen as a cornerstone of this vision, with focus areas including semiconductors, electronics, electric vehicles, renewable energy, and defence.
To support these goals, the government has ramped up capital expenditure to enhance infrastructure, create jobs, and invigorate manufacturing activity. These investments are expected to position India as a competitive player in the global manufacturing landscape.
The survey also highlighted an optimistic outlook among manufacturers. Business confidence was bolstered by expectations that marketing efforts and new product launches would drive demand.
Recent capacity expansions and forecasts of stronger market conditions in 2025 further supported positive sentiment within the industry.
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