After losing some momentum in March due to the West Asia conflict, growth across India’s private sector expanded at a quicker rate at the start of the new fiscal year in April, with survey data indicating a quicker upturn for manufacturers and improvement in both new orders and production.
However, the rates of increase were the second weakest since 2022, the private survey noted, as companies continued to indicate that the war in West Asia exerted upward pressure on inflation with input costs and output charges rising at the quickest rates in 44 and six months, respectively.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI) improved to 54.7 in April from 53.9 in March, underscoring an improvement in domestic momentum. The PMI reading remains above the 50-mark that separates expansion from contraction.
According to the PMI released on Monday, there were quicker increases in new orders and output, alongside the reinstatement of job creation and a rebound in business confidence in April. Exports were a bright area with new orders expanding sharply at the start of the first fiscal quarter and the pace of growth reaching a seven-month high, the survey said.
“India’s manufacturing PMI rose to 54.7 in April, up from 53.9 in March, but still marking the second-slowest improvement in operating conditions in nearly four years. Spillovers from the Middle East conflict are becoming more evident, particularly through inflation: input costs increased at the fastest pace since August 2022, and output prices rose at the quickest rate in six months. Even so, output, new orders (including exports) and employment all grew moderately, pointing to continued resilience in India’s manufacturing,” said Pranjul Bhandari, Chief India Economist at HSBC.
New orders, output
The upturn in April was driven by the index’s two largest sub-components: new orders and output, both of which grew from March levels, but trailed readings in at least three-and-a-half years. Manufacturers indicated that advertising and demand resilience supported sales and production, but that growth was hampered by competitive conditions, the war in West Asia and a reluctance among clients to approve pending quotes.
“Amid reports of higher prices for aluminium, chemicals, electrical components, fuel, leather, petroleum products and rubber, average cost burdens rose further in April. Panellists often attributed hikes to the Middle East war. The overall rate of inflation climbed to its highest August 2022. Subsequently, goods producers lifted their fees to the greatest extent in six months,” the survey said.
Consumer goods were the only category to see a slowdown in cost inflation, but the rate of increase here nevertheless surpassed those seen elsewhere. This sub-sector also topped the rankings for output charge inflation.
Although manufacturers in India purchased additional raw materials and semi-finished items in April, the rate of expansion retreated to the joint-weakest in almost two-and-a-half years, the survey noted.
Concurrently, input inventories rose at the slowest pace in almost five years. Growth was constrained by attempts among some firms to keep stocks lean due to subdued sales performances, qualitative data showed, the survey said.
Finished goods inventories increased for the first time in six months, but the rate of accumulation was slight overall, it added.
“Despite only a marginal increase in outstanding business volumes, manufacturers recruited additional workers at the start of the first fiscal quarter. Moreover, the rate of job creation was marked and the strongest in ten months. Hiring growth reflected expansion plans, according to anecdotal evidence,” the survey said.
Export orders
Export performance remained resilient during April. New export orders expanded sharply at the start of the first fiscal quarter, with the pace of growth reaching a seven-month high.
Firms noted better demand from clients in several countries, including Australia, France, Japan, Kenya, mainland China, Saudi Arabia, the UAE and the UK, said the survey.
According to the survey, Indian manufacturers remained optimistic towards growth prospects. The overall level of positive sentiment slipped since March, though was at its second-highest mark since November 2024. Confidence was pinned on hopes that marketing efforts will bear fruit and that pending projects will be approved.