Manufacturing activity picks up in October on GST relief, tech investments

New Delhi: India's manufacturing activity strengthened in October, fuelled by strong domestic demand on the back of the goods and services tax (GST) cuts, productivity gains and technology investment, according to a private survey released on Monday.

The HSBC India Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 59.2 in October from 57.7 in September. It stood at 57.5 in October 2024. New orders grew at a faster pace than in September, with firms crediting the improvement to advertising, resilient demand and GST reforms.

"Robust end-demand fuelled expansions in output, new orders and job creation," said Pranjul Bhandari, India chief economist at HSBC.


Manufacturers remained optimistic about future business conditions, buoyed by GST reforms, capacity expansion and marketing initiatives. They also anticipate sustained demand and approval of pending contracts.

"Future business sentiment is strong due to positive expectations around GST reform and healthy demand," Bhandari noted.

The GST Council approved a restructuring of the indirect tax framework effective September 22, introducing a two-slab rate of 5% and 18%, which lowered taxes on various consumer durables.

In October, job creation rose for the 20th consecutive month as companies hired more staff to manage rising workloads. However, the pace of expansion was moderate and similar to the previous month.

While domestic demand continued to drive growth, international sales increased at a slower pace. "The latest improvement in international demand for Indian goods was marked, though the least pronounced in the calendar year-to-date," the survey said.

According to the survey, inventories of raw material and semi-finished items rose at the second-fastest rate since May 2023, marking one of the strongest readings since data collection began in 2005.

Easing cost inflation supported an uptick in input purchasing, according to the survey. The rise in expenses was the weakest in eight months and below the long-run series average.

"Input prices moderated in October while average selling prices increased as some manufacturers passed on additional cost burdens to end-consumers," said Bhandari.

Despite easing cost pressures, output charge inflation matched September's level, making it the joint-highest in 12 years.

According to the survey respondents, strong demand was the primary reason behind the surge in output prices.