India’s manufacturing activity recovered the lost ground lost in February, picking up to its highest in eight months, at 58.1 in March as against 56.3 in the previous month, data released by S&P Global on Wednesday showed. The latest reading showed a substantial improvement in the health of the sector that was above its long-run average. Per the release, the rise was driven by stronger new orders growth as the new orders index recorded an eight-month high of 61.5. March saw total sales expand to the greatest extent since July 2024, with companies remarking on positive customer interest, favourable demand conditions and successful marketing initiatives.
Pranjul Bhandari, Chief India Economist at HSBC, said, “India registered a 58.1 manufacturing PMI in March, up substantially from 56.3 during the previous month. Although international orders slightly slowed, overall demand momentum remained robust, and the new orders index recorded an eight-month high of 61.5. Strong demand prompted firms to tap into their inventories, causing the fastest drop in finished goods stocks in over three years. Business expectations remained fairly optimistic, with around 30 per cent of survey participants foreseeing greater output volumes in the year ahead, compared to less than 2 per cent that anticipate a contraction.”
Subsequently, firms scaled up production volumes at the end of the 2024/25 fiscal year. The rate of expansion was sharp, above its historical average and the strongest in eight months. Although new export orders continued to increase strongly in March, S&P Global said, the pace of growth retreated to a three-month low. Where international sales expanded, panellists cited gains from Asia, Europe and the Middle East.
Update on pre and post production inventories
Per the survey findings, post-production inventories witnessed the quickest drop in over three years since several companies indicated that warehoused goods were used to meet rising sales requirements. The decline was the fourth in consecutive months and marked overall. To address potential stockouts, Indian manufacturers stepped up buying activity in March. Inputs were purchased to the greatest extent in seven months, and at a rate that was well above the series average.
Per S&P Global, despite the upturn in input demand, suppliers to the Indian manufacturing industry were generally able to deliver materials in a timely manner. Lead times shortened for the thirteenth successive month, albeit to the second-least degree over this period. Meanwhile, pre-production inventories rose sharply in March, and at the quickest pace in five months.
Furthermore, the month also saw recruitment drives and employment rose at a solid rate in the context of survey data. Amid reports of higher prices for copper, electronic items, leather, LPG and rubber, cost burdens rose further. The overall rate of inflation accelerated to a three-month high, but was well below its long-run average. Conversely, there was a softer increase in prices charged for Indian goods. March’s rise was moderate and the weakest in exactly one year. Finally, favourable demand conditions, better customer relations and projects pending approval underpinned upbeat forecasts for output levels in the coming 12 months.