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India's Manufacturing Sector on Rise! Clocks Strong Growth in January, Export Orders Drive Momentum

Indian Manufacturing sector sees strong growth in January, with export orders driving momentum. The report highlights improved activity and easing cost pressures.

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Manufacturing Sector

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India's manufacturing sector experienced strong growth in January, with a notable rise in new export orders and a likely boost in global restocking activity, as per the HSBC flash PMI report. The report, which analyses 100 activity indicators, indicates an improvement in growth momentum for the quarter ending December 2024. With 65% of indicators showing positive growth compared to 55% in the previous quarter, the Indian manufacturing sector appears to be gaining significant traction.

Surge in New Export Orders Fuels Growth

A key factor contributing to the growth of India's manufacturing sector is the sharp increase in new export orders. Manufacturers saw export demand rise faster than domestic orders and service orders, suggesting a global restocking trend ahead of potential tariff hikes. As countries prepare for new tariffs, the demand for manufactured goods has spiked, leading to an upturn in production and exports. This surge in demand is expected to continue driving manufacturing growth in the coming months.

Cost Pressures Differ Between Manufacturing and Services

The report also highlights the divergence in cost pressures between the manufacturing and services sectors. For manufacturers, input prices eased to a ten-month low, improving profit margins. In contrast, service providers faced rising input costs, which led to higher prices but deteriorating margins. This indicates that the manufacturing sector is in a better position to manage costs and maintain profitability compared to the services sector.

Inflation Declines, Paving the Way for Rate Cuts

Inflation is showing signs of easing, with the rate expected to drop to 4.2% in January. This decline could open the door for a reduction in interest rates, which would further stimulate growth. HSBC predicts two rate cuts of 25 basis points each in February and April, bringing the repo rate to 6%. These changes could provide additional support for India's manufacturing sector, boosting investment and demand.

India’s manufacturing sector is poised for further growth, driven by strong export orders and easing inflation, according to the HSBC report.

Manufacturing Sector
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