Manufacturing activity in February eases to 14-month low

India's manufacturing activity eased to a 14-month low of 56.3 in February from 57.7 in January, as new orders and production witnessed a mild moderation in momentum, a private survey showed Monday. The previous low for the HSBC India Manufacturing Purchasing Managers' Index (PMI) was 56 in November 2023.

As per the survey report, manufacturing activity expanded at its weakest pace in more than a year last month owing to cooling demand, but employment generation rose at a healthy pace while inflation eased. One in ten firms signalled greater recruitment activity, while 1% of companies shed jobs.

"India recorded a 56.3 manufacturing PMI in February, down slightly from 57.7 during the prior month, but still firmly within expansionary territory," said Pranjul Bhandari, chief India economist, HSBC.


India's manufacturing is likely to grow 4.3% in FY25, slower than 12.3% in the previous fiscal.

Official data published last week showed India's growth recovered to 6.2% in the third quarter, from a near two-year low of 5.4% in the previous quarter. The government has revised its full year growth estimate for FY25 at 6.5% from 6.4% earlier.

Secular Improvement

Business conditions improved across all three monitored sub-sectors: consumer, intermediate and investment goods. While firms recorded a rise in new export orders, the demand was softer than January. Moreover, job expansion also tapered from the previous month, showed the survey.

Producers also faced rising input cost pressures, and were able to pass on the costs to consumers, on account of a stronger demand.

Indian manufacturers faced another rise in input costs, with frequent reports of greater bamboo, leather, marketing, rubber and telecom prices. Encouragingly, the overall rate of inflation eased for the third straight month to its weakest in a year.

The fall in manufacturing activity did little to affect optimism, as outlook remained positive with firms banking on demand to lift growth in the coming year.

"Business expectations also remained very strong, with nearly one-third of survey participants foreseeing greater output volumes in the year ahead. Although output growth slowed to the weakest level since December 2023, overall momentum in India's manufacturing sector remained broadly positive in February," Bhandari said.