Cranking it up: Factory activity hits a 10-month high in April

New Delhi: India’s manufacturing sector logged its highest growth in 10 months, inching up to 58.2 in April from 58.1 in March, supported by strong sales and production, according to a private survey published Friday. The HSBC Purchasing Managers Index (PMI), compiled by S&P Global, was 58.8 in April 2024. “Manufacturing output growth strengthened to a ten-month high on robust orders,” said Pranjul Bhandari, India chief economist at HSBC.

The increase in output was the highest since June 2024, with consumer goods makers recording the fastest increase, the report said.

International orders rose to a 14-year high, excluding January, at the start of this fiscal year. Survey respondents cited demand growth from Africa, Asia, Europe, the Middle East and the Americas. “The notable increase in new export orders in April may indicate a potential shift in production to India, as businesses adapt to the evolving trade landscape and US tariff announcements,” said Bhandari.

On April 2, the US announced a reciprocal tariff on various countries, imposing 26% on Indian imports. Although President Donald Trump announced a 90-day pause until July 9, a baseline tariff of 10% remains in effect. While manufacturing PMI was negatively affected across Asia due to trade uncertainties, India emerged as an outlier. “Export-oriented economies in the region are bearing the brunt of the tariff hit, with new export orders in China, Korea having fallen sharply into contractionary territory,” noted Nomura. In contrast, domestic-oriented economies like India and Philippines have shown resilience, it added. Manufacturing activity in China fell to 49 in April from 50.5 in March. Other countries such as Indonesia, Malaysia, South Korea, and Thailand also recorded a decline. Cost pressures also intensified in India. Input prices rose at the fastest rate in four months in April, with firms citing higher building maintenance, labour, leather, paper, rubber, steel and transportation costs.According to the survey, anecdotal evidence suggests that companies transferred cost increases to clients leading output prices to their highest level in 11.5 years. “Input prices increased slightly faster, but the impact on margins could be more than offset by the much-faster rise in output prices, of which the index jumped to the highest level since October 2013,” Bhandari noted. To meet the output demand, manufacturers expanded their workforce. “Exactly 9% of survey participants took on extra workers, with a combination of permanent and temporary contracts reportedly being offered,” the report mentioned.