India Manufacturing PMI slipped to 53.5 in July, marking its lowest level since August 2021, although the sector continued to signal expansion in overall business activity. The latest HSBC India Manufacturing PMI data showed that manufacturing conditions improved at a below-trend pace as growth in new orders slowed and companies reduced the pace of input purchasing.
The seasonally adjusted India Manufacturing PMI declined from 54.2 in June to 53.5 in July. The reading remained above the neutral 50-mark, indicating continued growth, but it was below the long-run series average of 54.2. According to the survey, demand resilience continued to support output growth, while international sales regained momentum during the month.
India Manufacturing PMI Signals Slower Growth in July
Manufacturers reported another increase in new orders in July, although the pace of expansion was the second-weakest in more than four years. Survey participants said that advertising efforts and resilient demand supported sales, but increasingly challenging market conditions and weaker client interest in key products limited growth.
Export demand strengthened during the month, with firms reporting gains from Canada, Egypt, Indonesia, Kenya, Nepal, South Africa, Thailand and the United Arab Emirates. New export orders expanded at a faster rate, helping manufacturers maintain growth in production volumes despite softer domestic conditions.
Manufacturing output continued to rise in July, but growth remained among the slowest levels recorded since mid-2022. Consumer goods producers experienced weaker increases in both new orders and output, while manufacturers of intermediate and capital goods recorded stronger expansion.
Indian manufacturers also continued to rebuild inventory buffers by purchasing additional inputs. However, the pace of growth in input buying slowed to a 31-month low. Improved supply-chain conditions helped companies accumulate stocks, as supplier delivery times shortened at a near-record pace during July.
Stocks of purchases increased further at the start of the second fiscal quarter, while post-production inventories expanded following a sharp decline in June. According to the survey, the increase in finished-goods inventories was the strongest in more than 11 years.
Backlogs of work rose at the fastest pace in one year, although only a small proportion of firms reported higher outstanding business volumes. Employment growth weakened for the third consecutive month, with job creation expanding at the slowest pace in the current 29-month period of uninterrupted growth.
Cost pressures also eased during July. Overall input cost inflation fell to its weakest level in five months, although companies continued to report higher transportation expenses. Selling-price inflation remained moderate and broadly unchanged from June.
Business confidence improved from June’s recent low, supported by expectations of stronger demand, infrastructure projects and new client enquiries. Some firms also expressed optimism that market conditions would improve and that their marketing initiatives would generate results.
Pranjul Bhandari, Chief India Economist at HSBC, said supplier delivery times improved in July, indicating that supply-chain delays continued to ease. However, she noted that renewed tensions in the Middle East had created fresh uncertainty about the durability of those improvements.
According to Bhandari, manufacturers rebuilt inventories of both inputs and finished goods while purchasing volumes increased, suggesting that firms were securing supply and reducing exposure to potential disruptions. She added that output and new export orders strengthened, reflecting resilient demand, particularly from overseas markets.
Bhandari also said input cost inflation moderated during the month, while output price inflation accelerated, indicating that companies were once again passing on higher costs to protect margins.
