Manufacturing push

THE resurgence of India’s manufacturing sector in June, as reflected by the HSBC India Manufacturing Purchasing Managers’ Index (PMI) rising to 58.3 from May’s 57.5, is a testament to the robust demand driving the economy forward. This uptick underscores the resilience and potential of India, which remains the fastest-growing major economy globally. The PMI data indicates a vigorous expansion in manufacturing activities, bolstered by domestic demand and sustained government spending on infrastructure. The manufacturing sector ended the June quarter on a stronger footing as new orders and output drove the PMI to nearly five points above its long-term average. Despite a slight dip in the future output index to a three-month low, it remains above historical norms, suggesting continued optimism in the sector.

One of the standout aspects of the latest PMI report is the record pace of job creation. Hiring surged for the fourth consecutive month, reaching the highest rate since the survey began in 2005. This is a crucial development for the ruling BJP, which has faced political challenges, including a loss of parliamentary majority. The increase in manufacturing jobs could offer relief to the party. Emphasising the government’s role in furthering this growth trajectory, the positive performance of the manufacturing sector is likely to be a focal point in Nirmala Sitharaman’s upcoming Budget.

However, the sector’s growth comes amid persistent inflationary pressures. While input cost inflation slightly moderated in June, prices charged to customers rose at the fastest pace in two years. This indicates that manufacturers were able to pass on higher costs to consumers, leveraging the strong demand to maintain profit margins. However, inflation is expected to average around the Reserve Bank of India’s target of four per cent, with a leeway of two percentage points on either side, providing some stability.