India’s Manufacturing Growth Hits 12-Month Low in December: A Softer End to a Strong Year
Introduction
India’s manufacturing growth slowed to its weakest pace in 12 months in December 2024, reflecting softer expansions in factory orders and production, according to the HSBC India Manufacturing Purchasing Managers’ Index (PMI) compiled by S&P Global. Despite the moderation, the sector continued to showcase resilience, maintaining a robust growth trajectory above its long-term average.
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PMI Slips to 56.4, Marking the Slowest Expansion in 2024
The PMI for December was recorded at 56.4, down slightly from 56.5 in November and significantly lower than October’s 57.5. While the headline figure stayed well above the neutral 50-mark—which separates expansion from contraction—it highlighted the slowest growth since December 2023, when the PMI stood at 54.9.
According to the survey, the slower pace of growth was attributed to softer increases in output, new orders, and purchasing activity. However, employment levels rose at the fastest rate in four months, with approximately 10% of firms reporting new hires.
Cost Pressures Ease, But Inflationary Concerns Persist
Cost pressures eased during the month, with input price inflation remaining mild. However, charge inflation—prices passed on to consumers—remained historically high, indicating lingering concerns about profitability in the manufacturing sector.
Demand Dynamics: Slower Domestic Growth but Export Optimism
The rate of expansion in new domestic orders was the slowest in 2024, suggesting weaker growth in future production. On a brighter note, export orders rose at their fastest pace since July, reflecting sustained demand from international markets.
Infrastructure Boost Provides Respite
India’s infrastructure output, which accounts for 40% of industrial production, rose to a four-month high in November. Growth in six of the eight core sectors helped buffer the manufacturing slowdown, suggesting that industrial activity still holds pockets of strength.
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Manufacturing Slump Mirrors GDP Slowdown
The manufacturing slowdown aligns with broader economic trends. India’s GDP growth for the September quarter fell to 5.4%, down from 6.7% in Q1FY25 and 8.2% in the year-ago period. Manufacturing output in the September quarter grew by a mere 2.2%, compared to 14.3% in Q2FY24, raising concerns about the sector’s contribution to economic expansion.
Conclusion: A Balancing Act for 2025
India’s manufacturing sector demonstrated resilience despite headwinds of slowing demand and price pressures. As the country enters 2025, the challenge lies in sustaining growth momentum while addressing structural issues like scale inefficiencies and cost inflation. Policymakers and industry leaders must work collaboratively to maintain manufacturing as a critical pillar of India’s economic growth.
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