Solid manufacturing growth has helped India’s economy outperform its major peers. Asia’s third-largest economy grew 7.4% last quarter from a year earlier, the fastest expansion since early 2024 and much quicker than a Reuters poll median estimate of 6.7%.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 57.6 in May from 58.2 in April, lower than a preliminary estimate of 58.3, but still well above the 50.0 level that separates growth from contraction.
“India’s May manufacturing PMI signalled another month of robust growth in the sector, although the rate of expansion in output and new orders eased from the previous month,” said Pranjul Bhandari, chief India economist at HSBC.
The expansion in new orders – a key gauge of demand – eased to a three-month low but remained historically strong, supported by healthy domestic consumption and international sales.
Output growth decelerated to its weakest pace since February, though manufacturers maintained positive sentiment about the year ahead. Job creation was one major bright spot, with manufacturers increasing hiring at the fastest pace in the survey’s history, with permanent positions being created more frequently than temporary roles. “The acceleration in employment growth to a new peak is certainly a positive development,” Bhandari said.
Cost pressures intensified during May, with input price inflation climbing to a six-month high.
Manufacturers passed these costs on to customers, with output price inflation among the highest in over 11 years.
Growing price pressures could complicate monetary policy decisions for the Reserve Bank of India, which has already cut its key repo rate by a cumulative 50 basis points this year as overall inflation remains below the RBI’s 4.0% target.
The central bank is expected to cut interest rates on June 6 for a third consecutive meeting and once more in August, a Reuters poll showed last week.
