India's March manufacturing PMI rises to 16-year high, hiring picks up

India’s manufacturing sector experienced robust growth, expanding rapidly in 16 years due to rising demand, as per a survey. The HSBC final India Manufacturing Purchasing Managers’ Index, compiled by S&P Global last month increased to 59.1 from February’s 56.9, the highest level since February 2008. However, it was slightly lower than the preliminary estimate of 59.2. The reading remained above the 50-mark, indicating growth for the 33rd consecutive month, marking the longest streak since July 2013.

“(This) was on the back of the strongest increases in output and new orders since October 2020, parallel to the second-sharpest upturn in input inventories in the history of the survey,” the firm said in a press release on Tuesday.

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Companies aimed to bolster their inventory in anticipation of sales improvement particularly in the capital goods sector in March. Despite this optimism, overall sentiment dipped to a four-month low due to concerns about inflation. Cost pressures were the highest in five months, with companies facing increased prices for cotton, iron, machinery tools, plastics and steel.

“The HSBC final India Manufacturing PMI indicates that production growth continued to be strong, supported by both domestic and external demand,” Ines Lam, economist at HSBC quoted by Reuters as saying. Both output and new orders sub-indexes rose to their highest levels since October 2020. Exports expanded at the fastest pace in nearly two years.

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That boosted hiring in March and employment generation was at its strongest since September after remaining largely stagnant in the previous two months. “Buoyed by robust demand and improving profit margins, manufacturers have an optimistic outlook about future business conditions,” added Lam.

The sub-index eased for a second month to 63.3 as inflation concerns weighed on confidence while the outlook for the upcoming year was optimistic.

Input costs surged at their quickest rate in five months, yet not all were transferred to customers, as reflected by the prices charged sub-index hitting its lowest level in over a year. Some firms refrained from raising fees to retain clientele.

Persistent concerns about inflation prompted the Reserve Bank of India to resist interest rate reductions. According to a Reuters poll, no changes are anticipated this month, with the first cut not expected until the September quarter.

Input costs surged at their quickest rate in five months, yet not all were transferred to customers, as reflected by the prices charged sub-index hitting its lowest level in over a year. Some firms refrained from raising fees to retain clientele. Persistent concerns about inflation prompted the Reserve Bank of India to resist interest rate reductions. According to a Reuters poll, no changes are anticipated this month, with the first cut not expected until the September quarter.