India's factory activity grows at fastest pace in 4 months
What's the story
India's factory activity has grown at its fastest pace in four months, driven by strong domestic demand. The HSBC India Manufacturing Purchasing Managers' Index (PMI) rose to 56.9 in February from January's 55.4, remaining above the 50 mark that signals expansion. However, export growth slowed to a 17-month low during this period, according to a recent survey.
Economic outlook
Domestic demand drives growth
The latest PMI data suggests that India's economy is likely to remain resilient this quarter, following a 7.8% growth in October-December, driven by a 13.3% rise in manufacturing. For the entire fiscal year ending in March, the South Asian economy is projected to grow at 7.6%. However, new export orders grew at their slowest pace in 17 months, indicating US tariff uncertainty remains despite a recent trade deal with India.
Growth drivers
Production volumes increase despite export slowdown
The survey also showed that domestic demand is on the rise, leading to more new orders and higher output than seen since late last year. Companies are investing in technology upgrades and efficiency improvements. Despite the slowdown in exports, production volumes increased at the fastest rate in four months, driven by efficiency gains, solid demand, and technology investment.
Cost adjustments
Input cost inflation remains moderate
Input cost inflation remained moderate and unchanged from January. However, manufacturers increased their selling prices at the fastest rate in four months as strong demand allowed them to pass on increased costs. Employment increased to a four-month high but only marginally, with just 4% of firms reporting hiring while most made no staffing changes.