India’s manufacturing growth falls to 11-month low in November amid price pressures and weaker demand
- Export orders hit a four-month high, offering a silver lining as domestic demand falters under rising costs.
India's manufacturing growth slowed in November, with activity easing to its weakest level in 11 months, as price pressures and softer domestic demand weighed on the sector.
The HSBC India Manufacturing Purchasing Managers Index (PMI), compiled by S&P Global, came in at 56.5 for November, down from 57.5 in October and matching the level recorded in September. The latest reading, though firmly above the 50-point threshold indicating expansion, was below the preliminary flash estimate of 57.3, reflecting a more subdued rise in factory orders and production.
The PMI has remained above its long-term average for nearly three years, underscoring a steady pace of growth in India’s manufacturing sector. The survey draws responses from about 400 manufacturers nationwide, providing a snapshot of the sector’s health.
Weaker upturn
While new orders continued to grow in November, the pace of expansion was the second weakest in nearly a year. "Growth was supported by favourable demand conditions but stymied by fierce competition and price pressures," the survey noted.
Input costs rose at their fastest pace since July, driven by higher prices for chemicals, cotton, leather, and rubber. The increase in input costs led to the sharpest rise in output prices since October 2013, as manufacturers passed on additional freight, labour, and material costs to customers.
"Although price pressures curbed domestic sales to a certain extent, growth of new export orders gained momentum," it added.
Despite domestic challenges, international demand surged, with new export orders reaching a four-month high in November. Indian manufacturers reported gains from markets including Bangladesh, China, Italy, Japan, and the US.
“Strong broad-based international demand, evidenced by a four-month high in new export orders, fuelled the Indian manufacturing sector’s continued growth," said Pranjul Bhandari, chief India economist at HSBC.
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"At the same time, however, the rate of output expansion is decelerating due to intensifying price pressures. Input prices for a variety of intermediate goods — including chemicals, cotton, leather, and rubber — rose in November, while output prices soared to an eleven-year high as rising input, labour, and transportation costs were passed on to consumers," Bhandari added.
Improved demand outlook
The Reserve Bank of India (RBI) has maintained its FY25 GDP growth projection at 7.2%, pointing to strengthening rural and urban demand supported by a favourable monsoon forecast.
In its October bulletin, the central bank highlighted a seasonal boost from the festival period and rising consumer confidence as key drivers of demand. Rural demand is expected to gain further traction, underpinned by robust agricultural output.
Meanwhile, the HSBC survey underscored a notable rise in new export orders during November. With overseas demand gaining momentum, Indian manufacturers continued to ramp up production, leveraging favourable market conditions.
The $10 trillion ambition
India has set an ambitious target of becoming a $10 trillion economy within the next decade, with a strong emphasis on a thriving manufacturing sector. Key growth areas include semiconductors, electronics, electric vehicles, renewable energy, and defence.
To support this vision, the government has significantly ramped up capital expenditure, aiming to bolster infrastructure, generate employment, and invigorate manufacturing activity.
Survey findings revealed that manufacturers replenished their input stocks in November, with accumulation rates exceeding long-term averages despite moderating to the slowest pace of 2024.
Notably, a prolonged decline in finished goods inventories, stretching back to August 2017, came to an end, the survey revealed.
"Business optimism was spurred by predictions that marketing efforts and new product releases will bear fruit. Recent capacity expansion efforts and forecasts of demand strength also underpinned upbeat forecasts for output in 2025," it added.
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Business NewsEconomyIndia’s manufacturing growth falls to 11-month low in November amid price pressures and weaker demand
First Published:2 Dec 2024, 01:10 PM IST
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