India's manufacturing expands in June, PMI rises to 58.3
India's manufacturing sector experienced a surge in June, with the Manufacturing Purchasing Managers's Index (PMI) rising to 58.3 from May's three-month low of 57.5. This increase is attributed to a rise in new orders and output, as stated by Maitreyi Das, a global economist at HSBC. "The Indian manufacturing sector ended the June quarter on a stronger footing," Das said. The manufacturing PMI remained higher than the long-term average, contributing to an increase in employment rates.
Employment and consumer goods industry flourish
The surge in manufacturing activity led to the fastest employment growth in over 19 years. The consumer goods industry, in particular, performed exceptionally well, with significant increases also observed in the intermediate and investment goods categories. The survey included 400 firms that reported another month of strong growth of new export orders. "Manufacturers were able to pass on higher costs to customers, as demand remained robust, resulting in improved margins," Das explained.
Export growth and inflationary pressures rise
The driving economies for this export growth were Asia, Australia, Brazil, Canada, Europe and the US. Commerce and Industry Minister Piyush Goyal noted that India's goods and services exports are likely to cross $800 billion in FY25—3% higher than the previous year. Despite a reduction in input costs from the previous month, selling prices surged to their highest level in two years.
Strong growth momentum expected for current fiscal year
Experts predict that the growth momentum will likely remain strong during the current fiscal year, with India's growth expected to exceed 7%. This follows an upward revision of India's growth forecast by the Reserve Bank of India to 7.2% from the 7% projected earlier. The Indian economy expanded by 8.2% in FY24 due to stronger manufacturing and capex growth. Despite this positive outlook, the future output index receded to a three-month low, although it remains above the historical average.
