India’s manufacturing industry experienced another month of strong growth in June, although the pace of expansion slightly slowed from the previous month, according to a private survey. The Manufacturing Purchasing Managers’ Index (PMI) compiled by S&P Global came in at 57.8 in June, down from May’s 58.7. While this indicates a moderation in growth, it still reflects robust demand for Indian-made products both domestically and internationally.
The survey revealed that new orders and output continued to rise sharply in June, driven by strong demand from both domestic and foreign markets. In fact, foreign demand increased for the 15th consecutive month. The positive outlook for the manufacturing industry also led to a boost in business confidence and optimism, reaching the highest level so far this year.
To meet the increasing demand, firms increased their workforce for the third consecutive month. However, the rate of employment expansion was at a moderate level, despite being the second-highest since November. The survey also highlighted higher input costs due to increased prices for labor and raw materials. However, the rate of inflation remained only slightly higher than the previous month and below the long-run average.
Companies were able to pass on some of these increased costs to clients, resulting in the output prices index reaching a 13-month high. The ability of firms to maintain a competitive edge while adjusting their pricing strategies reflected the buoyant demand in the market.
Inflation in India remains within the Reserve Bank of India’s (RBI) comfort zone of 2%-6%. However, the central bank has left the door open for future interest rate hikes, despite keeping the repo rate at 6.50% since April. The RBI has already raised rates by 250 basis points since May 2022, and it is predicted to remain unchanged until next year.
The robust growth in India’s manufacturing industry suggests a positive outlook for the country’s economy. The continued expansion of the manufacturing sector, driven by strong demand domestically and internationally, is a promising sign for India’s overall economic growth. However, increased input costs and the potential for future interest rate hikes may pose challenges in the future. Nevertheless, the current data indicates a resilient and vibrant manufacturing industry in India.
