India’s manufacturing PMI hits 14-month high on surge in orders, hiring

India’s manufacturing sector posted its strongest performance in over a year in June, as output, new orders, and employment surged amid rising global demand and easing cost pressures. The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, climbed to 58.4 in June from 57.6 in May, the highest level in 14 months and well above the long-run average of 54.1. A reading above 50 indicates expansion, and the June print reflects a substantial improvement in the sector’s health. This comes at the end of the first fiscal quarter, which has seen consistent gains in production and sales, despite global geopolitical tensions and trade uncertainties.

Export orders surge, led by demand from US

A key driver of the June surge was a sharp acceleration in international demand. New export orders grew at the third-fastest pace since the survey began in 2005, with Indian manufacturers citing stronger demand from across regions, particularly the United States. The increase in global interest helped offset slowdowns in the consumer and capital goods segments, even as intermediate goods producers led the expansion.

Domestic new orders also picked up, supported by robust marketing efforts. The combined demand drove production volumes to their highest pace since April 2024. “To keep up with strong demand — particularly from international markets — Indian manufacturing firms had to tap deeper into their inventories, causing the stock of finished goods to continue shrinking,” said Pranjul Bhandari, Chief India Economist at HSBC.

Record hiring and easing input costs boost sentiment

The rise in demand also triggered the fastest pace of hiring in the survey’s history, with most firms reporting short-term recruitment to manage increasing workloads. Backlogs of work, which had stagnated in May, increased again in June.

Cost pressures continued to ease, even as prices for key inputs like iron and steel remained elevated. Input inflation dropped to a four-month low and was negligible relative to historical averages. Despite this, output prices rose markedly as manufacturers passed on higher freight, labour, and material costs to clients, supported by strong demand.

Inventory patterns reflected the shifting demand landscape. While purchases of raw materials rose at the fastest pace in 14 months, finished goods stocks declined significantly, with firms drawing down existing inventory to fulfil orders. Supply chains also showed improvement, with delivery times shortening at the quickest rate in five months.

Looking ahead, the manufacturing sector’s outlook remains broadly positive. However, manufacturers remain cautious about inflationary pressures, increasing competition, and changing consumer preferences.

The PMI data complements India’s broader economic picture. The country’s GDP grew 6.5 per cent in FY25, supported by a strong 7.4 per cent expansion in the March quarter. Manufacturing output grew 4.5 per cent for the year, indicating that the sector continues to play a key role in India’s post-pandemic economic recovery.