India’s manufacturing sector activity fell to a 14-month low in February amid a slower growth in demand and production. However, the business expectations remained strong, the HSBC India Manufacturing Purchasing Managers’ Index (PMI) report realeased on Monday said.
The PMI index was 56.3 in February, down from 57.7 in January, but remained firmly within the ‘expansionary’ territory. An index value above 50 means expansion, while below 50 denotes contraction.
Analysts remain bullish that the private sector capex cycle is showing early signs of improvement, which is reflected in the strong investment proposals received by the states at their respective industry summits. Further, SBI chairman C.S. Setty has recently said that private sector capex is gradually picking up but capex in core sectors such as steel is yet to show green shoots.
Data compiled by CMIE shows that proposals to set up new capacities in January 2025 saw a sharp rise to ₹6 trillion. This is about three times the value of new investment proposals made in December 2024, which stood at ₹2.1 trillion. A total of 308 projects have been proposed in January, slightly exceeding the 277 proposed the previous month.
“Although output growth slowed to the weakest level since December 2023, overall momentum in India’s manufacturing sector remained broadly positive in February,” said Pranjul Bhandari, chief India economist at HSBC.
The survey said that new export orders rose strongly in February, as manufacturers continued to capitalise on robust global demand for their goods. Moreover, favourable domestic and international demand prompted firms to increase purchasing activity and hire extra workers.
“Business expectations also remained very strong, with nearly a third of survey participants foreseeing greater output volumes in the year ahead,” Bhandari said.
On the jobs front, manufacturers continued to expand their workforce numbers in February. “One in 10 firms signalled greater recruitment activity, while 1 per cent of companies shed jobs,” the survey said.
The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.
Input costs remained a concern among Indian manufacturers who have passed on the high labour costs to consumers. “Qualitative data showed that firms passed on higher labour cost to clients, facilitated by favourable demand conditions,” the report said.