India's Manufacturing Sector Surges to Eight-Month High in March
Strong Demand Propels Manufacturing Growth
India's manufacturing sector witnessed its fastest expansion in eight months, driven by robust domestic demand and increased output, according to the HSBC India Manufacturing Purchasing Managers’ Index (PMI) released by S&P Global. The PMI rose to 58.1 in March, a significant jump from 56.3 in February and 57.7 in January, reinforcing the sector’s resilience.
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A PMI reading above 50 signifies expansion, and March's figure highlights a substantial improvement in manufacturing activity. "Total sales expanded at the highest rate since July 2024, supported by strong customer interest, favorable demand conditions, and effective marketing strategies," the survey reported.
Export Growth Slows Amid Global Uncertainty
Despite strong domestic sales, export growth decelerated to a three-month low, indicating external headwinds. However, Indian manufacturers recorded positive demand from Asia, Europe, and West Asia. HSBC’s Chief India Economist, Pranjul Bhandari, remarked, "Although international orders slightly slowed, overall demand momentum remained strong, with the new orders index reaching an eight-month high of 61.5."
Inventory Drawdowns Reflect Surging Demand
The rising demand led firms to reduce finished goods inventories at the fastest rate in over three years, signaling strong order fulfillment. Business sentiment remains optimistic, with 30% of firms expecting higher output over the next year, while fewer than 2% anticipate a decline.
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Manufacturing's Role in India's Economic Growth
India's economic growth rebounded in Q3 FY25, with GDP expanding at 6.2%, though still lagging behind the previous fiscal year's pace. The manufacturing sector contributed 3.5% growth, an improvement from 2.1% in Q2 FY25 but considerably lower than the 14% and 7.5% recorded in Q4 FY24 and Q1 FY25, respectively. This sluggish pace has weighed on overall GDP expansion.
The National Statistics Office (NSO) projects a 6.5% GDP growth rate for FY25. To meet this target, GDP must grow at 7.6% in Q4 FY25, an ambitious benchmark given current trends.
Outlook: Can Manufacturing Sustain Its Momentum?
The strong PMI reading underscores India's manufacturing resilience, but challenges remain. Global trade risks, supply chain constraints, and export slowdowns could impact sustained growth. Policymakers must focus on enhancing industrial production, fostering export competitiveness, and ensuring continued domestic demand strength to maintain this positive trajectory.
As India strides towards economic recovery, the manufacturing sector remains a vital pillar, shaping the country's industrial and economic future.
Also Read : India’s Strategic Trade Diplomacy: Balancing Relations with the US and China
