India’s Manufacturing PMI Moderates To 57.6 In May But Remains On Growth Path

New Delhi, Jun 2 (KNN) India's manufacturing sector registered a moderate deceleration in May 2025, with the HSBC India Manufacturing Purchasing Managers' Index declining to 57.6 from 58.2 recorded in April.

While this represents the lowest reading since February, the index remains significantly above the neutral 50.0 threshold and exceeds the long-term average of 54.1, signalling continued expansion in manufacturing activity.

The sector's growth trajectory was supported by robust domestic and international demand, effective marketing strategies, and a notable increase in export orders, which expanded at one of the fastest rates observed in three years.

Manufacturing companies reported strong demand from major global markets across Asia, Europe, West Asia, and the United States.

Survey respondents identified several factors contributing to the May deceleration, including intensified market competition, rising cost pressures, and ongoing geopolitical tensions related to the India-Pakistan conflict, which have affected business confidence levels.

Manufacturing employment reached unprecedented levels in May, with hiring accelerating to the fastest pace recorded in the PMI survey's history.

Companies demonstrated a clear preference for permanent positions over temporary roles, and this sustained job creation enabled firms to manage operational workloads more effectively, ending a six-month period of increasing order backlogs.

HSBC Chief India Economist Pranjul Bhandari commented on the findings, stating that India's May manufacturing PMI reflected another month of solid sector growth, despite a moderation in output and new order expansion rates compared to the previous month.

Bhandari highlighted the employment growth acceleration as a particularly positive development, noting that while input cost inflation is increasing, manufacturers appear capable of protecting profit margins through strategic output price adjustments.

Cost pressures intensified during May, with input inflation reaching a six-month peak. Primary cost drivers included increases in aluminium, cement, iron, leather, rubber, and sand prices, accompanied by rising freight and labour expenses.

In response to these inflationary pressures, companies implemented selling price increases at rates among the steepest witnessed in over eleven years to preserve profit margins.

Despite facing these cost challenges, confidence levels among Indian manufacturers remained elevated.

Business leaders expressed optimism regarding output growth prospects over the next twelve months, citing expanded advertising efforts and increased customer inquiries as significant growth opportunities.

Broader industrial production data revealed a slowdown, with overall growth declining to 2.7 percent in April, marking the lowest expansion rate in eight months and down from the revised 3.94 percent growth recorded in March.

This deceleration was primarily attributed to high base effects and a sequential decline in mining output, according to recent data released by the National Statistics Office.

The Index of Industrial Production data showed varied performance across different sectors during April. The mining sector contracted by 0.2 percent, representing its first decline in eight months, while electricity sector output growth slowed to 1.1 percent, reaching a seven-month low.

Manufacturing output maintained growth at 3.4 percent, though at a moderately slower pace compared to preceding months.

(KNN Bureau)