India's Manufacturing Sector Shows Robust Growth in January with Export Surge: Report

Based on an analysis of 100 activity indicators, the report suggests that the growth momentum has improved in the quarter ending December with 65 per cent of the indicators growing at a positive clip in the December quarter compared to 55 per cent in the previous one.

India's manufacturing sector registered a strong growth in January this year led by a sharp rise in new export orders and a likely flurry of restocking activity around the world, according to the HSBC flash PMI report released on Friday.

Based on an analysis of 100 activity indicators, the report suggests that the growth momentum has improved in the quarter ending December with 65 per cent of the indicators growing at a positive clip in the December quarter compared to 55 per cent in the previous one.

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However, services PMI in January was a bit lesser than last month, according to a statement.

The divergence between manufacturing and services could be driven by tariff fears. We find that new export orders rose sharply for manufacturers, in fact, more sharply than the rise in domestic orders or the rise in service orders. This, we think, can be attributed to rapid restocking around the world, before new likely tariffs kick in. And manufacturing output responded to these new orders by raising output rapidly," the report states.

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Trends in the cost pressures diverged too. Input prices eased to a ten-month low for manufacturers, while there was an increase in prices of the service providers -- that's the fastest since August 2023. This resulted in higher price charges by the service providers. Nonetheless, their margins continued to deteriorate as the rise in prices charged did not catch up with the increase in costs. Manufacturers' margins improved on the other hand, the report said. 

It also points out that inflation is on its way down and is expected to fall further to 4.2 per cent in January which is likely to pave the way for an easing of monetary policy. HSBC expects two rate cuts of 25bp each over February and April, taking the repo rate to 6 per cent.

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The flash PMI gives an advanced indication of the final Manufacturing, Services and Composite PMI data for the current month and is published about one week before the final PMI indices publication. The flash PMI is usually based on about 80 per cent-90 percent of all PMI survey responses received each month, which are all included in the final release.

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