PMI rises to 54.7; Inflation pressures mount

New Delhi: India's manufacturing sector activity picked up modestly in April, driven by improvements in new business orders and production, a private survey released on Monday showed. The growth, however, was the second weakest in nearly four years and manufacturers noted rising inflationary pressures due to the West Asia conflict.

The HSBC Purchasing Managers Index (PMI), compiled by S&P Global, rose to 54.7 in April from 53.9 in March. It was 58.2 in April of last year. A reading above 50 indicates expansion.

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Pranjul Bhandari, chief India economist at HSBC, said that though the PMI rose in April, it still marked the second slowest improvement in operating conditions in nearly four years.

Firms noted that the West Asia conflict contributed to higher inflation. The average cost burden increased in April amid reports of higher prices for aluminium, chemicals, electrical components, fuel, leather, petroleum products and rubber.

Bhandari highlighted that inflation spillovers from the conflict are becoming more evident, with input costs rising at their fastest pace since August 2022 and output prices increasing at the quickest rate in six months.

According to the survey report, consumer goods was the only category to record a slowdown in cost inflation, though it still saw stronger increases than other sectors. This segment led in output price inflation. Both new orders and output, the two largest sub-components of the PMI, rose compared with March, but remained below levels seen over the last three-and-a-half years.

Survey participants said that advertising and resilient demand supported sales and production. However, growth was constrained by competitive pressures, the war in West Asia and client hesitancy in approving pending quotes.

"Output, new orders (including exports) and employment all grew moderately, pointing to continued resilience in manufacturing sector," said Bhandari.

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Export performance in April was particularly strong, reaching a seven-month high. Firms noted improved demand from markets such as Australia, France, Japan, Kenya, mainland China, Saudi Arabia, the UAE and the UK.

Hiring activity also strengthened, with job creation rising at the fastest rate in 10 months, suggesting that firms are preparing for expansion.

According to the report, manufacturers are optimistic, expecting marketing initiatives to drive growth and pending projects to gain approval.