India’s manufacturing sector experienced a slight deceleration in growth in April, yet remained robust due to sustained high demand, according to data released by a private business survey on Thursday.

The HSBC final India Manufacturing Purchasing Managers’ Index (PMI) moderated to 58.8 in April from a 16-year high of 59.1 in March. Despite this dip, India’s PMI has consistently remained above the neutral mark of 50.0 and its long-run average of 53.9, indicating continued expansion in the sector.

Pranjul Bhandari, Chief India Economist at HSBC, noted, “April’s manufacturing PMI recorded the second-fastest improvement in operating conditions in three-and-a-half years, bolstered by strong demand conditions which resulted in a further expansion of output, albeit slightly slower than in March.”

The report highlighted a surge in input stocks to levels unseen in the past 19 years, showcasing manufacturers’ confidence in future demand. Additionally, increased buying levels, coupled with improved supplier performance, facilitated inventory-building initiatives.

Bhandari further elaborated, “Improvements in suppliers’ delivery times contributed to increased purchasing activity. Additionally, a positive outlook for the year ahead prompted firms to expand their staffing levels.”

One notable aspect of April’s performance was the remarkable rise in raw material stocks, reaching their highest point since June 2023. Despite escalating costs of raw materials and labor, inflation remained below historical averages, prompting manufacturers to pass on these increases to consumers through higher output charges, thereby bolstering margins.

“On the price front, higher costs of raw materials and labour led to a modest uptick in input costs, but inflation remains below the historical average. However, firms passed these increases onto consumers through higher output charges, as demand remained resilient, resulting in improved margins,” Bhandari said.

Sustained improvements in demand, both domestically and internationally, were cited as key growth drivers, with new export orders witnessing a notable increase. Manufacturers foresee a positive outlook for the year ahead, with expectations of higher output and buoyant demand, further supported by strengthening business confidence.

In response to the surge in demand, manufacturers expanded their workforce at the quickest pace since September 2023. Despite intensifying cost pressures, the sector remained resilient, with inflationary pressures below long-run averages.

Amid reports of rising material and labor costs, Indian manufacturers remained optimistic about the future outlook, viewing advertising and brand recognition as opportunities for further growth, the report concluded.

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