India’s manufacturing sector continued its upward trajectory in October 2024, with the Purchasing Managers’ Index (PMI) climbing to 57.5 from September’s 56.5. This strong PMI reading, which exceeds the 50-mark indicative of sectoral expansion, highlights the sector’s resilience amid global economic uncertainties. The main drivers of this increase are expanded domestic and international orders, reflecting a robust demand environment for Indian goods and a surge in export orders, particularly to Asia, Europe, and North America.
Key Factors Fueling the Growth:
- Increased Domestic Demand: Companies across India are benefiting from strong domestic demand, which has buoyed manufacturing output and enabled firms to introduce new products with successful marketing campaigns. This domestic momentum comes partly from seasonal factors and is amplified by positive consumer sentiment heading into the festive period.
- Rising Export Orders: The demand for Indian products internationally also saw a boost in October, with strong growth in export orders helping counterbalance the sector’s global challenges. Sectors benefiting from this demand include engineering goods, textiles, and consumer electronics. October marked a bounce-back from weaker export demand earlier in the year, as companies secured more contracts across major global markets, including Europe, Latin America, and the United States.
- Job Creation: Employment levels in manufacturing saw a significant rise, with companies hiring additional staff at one of the highest rates in recent months. This increase in hiring not only reflects expanding business operations but also speaks to the sector’s confidence in sustained demand. Nearly 10% of surveyed firms indicated adding employees, an indication of companies’ commitment to meeting rising production needs.
- Rising Inflationary Pressures: Despite the robust performance, input prices have risen due to inflationary pressures on materials, labor, and logistics. This has led to increased output prices as manufacturers pass on part of these costs to consumers. Cost pressures are also being managed through increased efficiency and supply chain adjustments, although some firms have opted to absorb part of the cost to maintain competitive pricing.
- Business Optimism for the Future: Indian manufacturers are notably optimistic about the future, with business confidence peaking due to expectations of ongoing demand, both domestically and globally. This optimism aligns with projected economic growth and government initiatives supporting manufacturing, such as the “Make in India” push and new incentives for export-oriented industries.
The PMI surge demonstrates the resilience of India’s manufacturing sector and its ability to capitalize on both internal and external demand. However, with inflationary pressures remaining a concern, manufacturers may face challenges in sustaining growth without eroding margins.
