India's March factory activity expands at its fastest pace in 8 months

'Buoyant demand' helps sales by companies that report fastest drop in finished goods stocks: PMI survey

India’s manufacturing activity grew at its fastest pace in eight months in March, recovering from a more than a one-year low as “buoyant demand” helped sales by companies, said a private survey on Tuesday.

 

The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, improved to 58.1 in March from 56.3 in February when the gauge was at a 14-month low. A figure above 50 in the index denotes expansion in manufacturing activity that month and below it signifies contraction. The headline figure remained in the expansion zone for the 45th running.

 

“March's acceleration came despite a mild slowdown in international order growth. Buoyant demand led companies to tap into their inventories to meet increased client appetite, resulting in the most rapid decline in finished goods stocks since January 2022,” the survey noted.

 

Firms countered declining stocks by acquiring additional production inputs at the quickest pace in seven months. A stronger increase in purchase prices contrasted with a softer rise in selling charges.

 

“Helping boost the PMI was a stronger contribution from its largest sub-component: the new orders index. 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,” said the survey.

 

“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," said Pranjul Bhandari, chief India economist at HSBC. 

 

International orders dipped but overall demand momentum remained robust and the new orders index recorded an eight-month high of 61.5, she said.

 

The survey noted that although new exports increased in March, the pace of growth fell to a three-month low. Sales expanded in Asia, Europe and West Asia.

 

“Several companies indicated that warehoused goods were used to meet rising sales requirements, which triggered the quickest drop in post-production inventories in over three years. 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.”

 

Companies continue expanding their workforce, albeit at a slower pace in March.