India’s Manufacturing Growth Slows to 11-Month Low in November Amid Price Pressures
Factory activity at 11-month low in November amid cost pressure
India's manufacturing sector showed signs of a slowdown in November, with growth easing to its weakest level in 11 months due to mounting price pressures and softer domestic demand. The latest data from the HSBC India Manufacturing Purchasing Managers Index (PMI) highlighted a nuanced picture of the sector, balancing domestic challenges with robust export demand.
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PMI Indicates Slower Expansion
The HSBC India Manufacturing PMI, compiled by S&P Global, dipped to 56.5 in November, down from 57.5 in October. While still above the critical 50-point threshold that signifies expansion, the reading was the lowest since September and below the preliminary flash estimate of 57.3.
The PMI has consistently remained above its long-term average for nearly three years, reflecting overall resilience in India’s manufacturing landscape. However, November’s data underscores a deceleration in factory orders and production.
Price Pressures Erode Domestic Demand
Input costs surged at the fastest rate since July, driven by rising prices for key materials such as chemicals, cotton, leather, and rubber. Consequently, manufacturers raised output prices at the sharpest rate since October 2013, transferring increased costs of freight, labour, and raw materials to consumers.
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Export Orders Offer a Silver Lining
Despite domestic headwinds, export demand surged in November, with new export orders reaching a four-month high. Indian manufacturers saw increased orders from key markets, including the US, Japan, China, and Italy.
Government’s Vision: A $10 Trillion Economy
India’s ambition to become a $10 trillion economy within the next decade hinges heavily on a robust manufacturing sector. The government has ramped up capital expenditure to enhance infrastructure, create jobs, and invigorate industrial activity. Focus areas include semiconductors, renewable energy, and electric vehicles, crucial to the nation’s long-term economic growth.
Improved Demand Outlook for 2025
The Reserve Bank of India’s (RBI) maintained GDP growth projection of 7.2% for FY25 reflects confidence in the strength of rural and urban demand. Factors such as a favourable monsoon and a post-festival consumption boost are expected to sustain momentum.
Survey findings revealed manufacturers replenishing input stocks at a pace above historical averages, indicating cautious optimism. Additionally, finished goods inventories, which had been in decline since 2017, stabilized in November.
Navigating Challenges in 2024 and Beyond
While India's manufacturing sector continues to expand, the pace of growth is tempered by intensifying price pressures and domestic competition. Business leaders remain optimistic about the future, banking on capacity expansion, marketing initiatives, and new product launches to drive demand in 2025.
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