India's Manufacturing PMI: A Mixed Bag of Growth and Inflation Challenges

India's manufacturing PMI climbed to 54.7 in April but highlighted the second-slowest improvement in nearly four years. Despite rising global interest and export orders, ongoing West Asia conflicts have intensified inflationary pressures. While new orders and employment saw moderate growth, input costs surged, affecting overall optimism.

In April, India's manufacturing Purchasing Managers' Index (PMI) rose to 54.7 from March's 53.9, indicating ongoing recovery amid challenges. This gain represented the second-slowest improvement in operating conditions over nearly four years.

According to the HSBC India Manufacturing PMI report, new business and production levels experienced slight recoveries, though the rates remained among the weakest since 2022. Industry growth was supported by advertising and resilient demand but faced challenges due to competitive pressures, the West Asia conflict, and hesitation in client approvals.

Despite these hurdles, international demand brought a positive note, with export orders expanding at their fastest rate since September. However, the Middle East conflict contributed to significant inflationary pressures, with input and output prices rising sharply over recent months, affecting producer margins.

Pranjul Bhandari, HSBC's Chief India Economist, noted the broader impacts of the regional conflict, citing the remarkable increases in input costs and output prices since August 2022 and in six months, respectively. Nonetheless, the sector showed resilience with moderate growth in output, new orders, and employment, even as inventory growth slowed significantly.

Improved supplier coordination led to better lead times, historically strong for the period. Manufacturers' growth outlook remained positive, bolstered by expectations of successful marketing strategies and project approvals.