India's manufacturing PMI expands to 54.7 as demand picks up faster

India’s manufacturing sector witnessed faster growth in April, sequentially, due to quicker increases in production and factory orders, as well as renewed expansion in international sales. The S&P Global India Manufacturing Purchasing Managers’ Index (PMI) rose from 54 in March to 54.7 in April. This comes as relaxation in Covid restrictions continued to support demand.

The index was, however, marginally lower than 54.9 in February. The April PMI data pointed to an improvement in overall operating conditions for the 10th straight month. In PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

“The Indian manufacturing PMI remained well in positive territory during April, recovering some of the ground lost in March. Factories continued to scale up production at an above-trend pace, with the ongoing increases in sales and input purchasing, suggesting that growth will be sustained in the near-term,” said Pollyanna De Lima, economics associate director at S&P Global.

Meanwhile, inflationary pressures intensified, owing to elevated global commodity prices due to Russia’s invasion of Ukraine. Input prices increased at the fastest pace in five months, while output charge inflation hit a 12-month high.

“A major insight from the latest results was an intensification of inflationary pressures, as energy price volatility, global shortages of inputs and the war in Ukraine pushed up purchasing costs. Companies responded to this by hiking their fees to the greatest extent in one year,” Lima said.

Lima further added that this escalation of price pressures could dampen demand as firms continue to share additional cost burdens with their clients.

With capacity pressures among Indian manufacturers remaining negligible, shown by a marginal rise in backlogs, there was a slight increase in employment during April, the survey said. It added that a vast majority of survey participants reported unchanged workforces from March levels.

“There has been a gradual yet consistent easing in momentum since the beginning of CY22, and high global commodity prices add to downside risks to the growth ahead. Even as India is still leading the Asian emerging markets in PMI, overall business confidence remained subdued by historical standards. It was marred by economic uncertainty and inflation concerns among manufacturers,” said Madhavi Arora, lead economist at Emkay Global.