India's Strong Manufacturing Growth Continues In April

The Indian manufacturing sector started the first fiscal quarter in a high gear, according to the latest HSBC PMI data. Operating conditions improved at the second-fastest pace in three-and-a-half years, supported by buoyant demand. Firms experienced a sharp upturn in new business intakes, and scaled up production accordingly.

With sales expected to remain positive, buying levels were raised and input stocks lifted to one of the greatest extents seen in over 19 years of data collection. Cost pressures ticked higher, though remained historically mild, pushing up charge inflation to the strongest since January. Despite falling from 59.1 in March to 58.8 in April, the seasonally adjusted HSBC India Manufacturing Purchasing Managers Index (PMI) signaled the second-best improvement in the health of the sector for three-and-a-half years. The PMI was comfortably above both the neutral mark of 50.0 and its long-run average (53.9).

Stocks of purchases, one of the five sub-components of the headline figure, increased sharply in April. April's rise in raw material stocks was supported by a further increase in buying levels. Indian manufacturers reported robust demand for their goods in April, from domestic and external clients.

Sustained improvements in demand, favorable economic conditions and greater sales volumes continued to underpin output growth. Indian goods producers forecast higher output in the year ahead, relative to present levels. To fulfil current and expected improvements in demand, manufacturers hired additional staff at the start of the first fiscal quarter.

Although the latest results showed an intensification of cost pressures during April, the rate of inflation remained below its long-run average. Amid reports of higher material and labor costs, Indian manufacturers increased their selling prices in April.

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