Operating conditions for India’s manufacturers improved further in January, according to the HSBC India Manufacturing Purchasing Managers’ Index (PMI). The index, fuelled by higher output and strong orders, rose to 51.4, from 50.7 in December – the highest reading since March 2013. However, the pace of expansion was below the series average of 55.1.
The HSBC India Manufacturing PMI is a composite indicator designed to provide an overall view of activity in the manufacturing sector. A reading above 50 signals improvement, while below 50 signals deterioration.
New orders expanded at the fastest rate for ten months, helped by an improvement in new export business. Output rose for the third consecutive month, with respondents citing new contracts as the main reason for increased production levels.
“Manufacturing activity moved into a higher gear led by faster growth in new orders," says Leif Eskesen, Chief Economist for India and ASEAN, HSBC. "However, inflation pressures also firmed, suggesting that the Reserve Bank of India has to keep up its inflation guards.”
The survey suggests that consumer and intermediate goods were behind the recent expansion, but that capital goods production softened. Backlogs of work continued to rise but at a slightly slower rate, probably helped by stronger employment growth.
Purchasing activity picked up at the start of 2014, in line with the rise in order flows. Average input costs increased, with manufacturers reporting that higher prices for raw materials were passed on to customers.