India Manufacturing PMI Slips To 53.5 In July, But Export Demand Keeps Factories Growing

India's manufacturing sector continued to expand in July, extending its growth streak even as momentum softened from the previous month. Strong overseas demand and an improvement in supply-chain conditions helped factories sustain production, although hiring activity lost pace and overall growth eased marginally.

According to the latest HSBC India Manufacturing Purchasing Managers' Index (PMI) released on Monday, the manufacturing PMI stood at 53.5 in July, down from 54.2 in June. As reported by IANS, the reading remained comfortably above the 50-point threshold that separates expansion from contraction, signalling that operating conditions in the sector continued to improve.

Export Orders Provide Fresh Support

One of the standout trends in the July survey was the continued strength in export demand.

Manufacturers reported a noticeable increase in new orders from overseas markets, with companies citing stronger demand from countries including Canada, Egypt, Indonesia, Kenya, Nepal, South Africa, Thailand and the UAE.

The rise in export orders helped support overall production during the month, even as some businesses reported softer client interest for certain products and challenging market conditions in parts of the domestic market.

According to the survey, firms also continued to benefit from advertising efforts and resilient customer demand, which contributed to sustained growth in both output and new business.

Production Expands As Supply Chains Improve

Manufacturing companies responded to rising orders by increasing production levels during July.

Producers of intermediate and capital goods registered stronger growth in both output and new orders, while the consumer goods segment expanded at a comparatively slower pace.

The survey also pointed to a further easing of supply-chain constraints. Delivery times for inputs improved at one of the fastest rates recorded in the survey's history, enabling manufacturers to replenish inventories more efficiently.

Companies increased purchases of raw materials, while stocks of finished goods rose at the quickest pace in more than 11 years, reflecting greater confidence in future demand and smoother logistics.

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Input Costs Ease, But Selling Prices Rise

Although inflationary pressures remained part of the operating environment, the survey suggested that cost conditions became more favourable during the month.

Input cost inflation eased to a five-month low, reducing pressure on manufacturers' expenses.

However, firms also increased the prices charged to customers at a faster pace, indicating that businesses continued to pass on part of their costs in an effort to protect profit margins.

Commenting on the findings, Pranjul Bhandari, Chief India Economist at HSBC, said improving supplier delivery times suggested that supply-chain bottlenecks were continuing to ease, although geopolitical developments remained a potential source of risk.

She also noted that while input cost inflation moderated, output price inflation accelerated as companies increasingly passed higher costs on to customers.

Hiring Loses Momentum

Despite continued expansion in production and orders, employment growth slowed during July.

According to the survey, manufacturers continued to recruit additional workers, but the pace of hiring was the weakest recorded during the current 29-month period of employment growth.

The moderation suggests that while businesses remain optimistic about demand, they are adopting a more measured approach to workforce expansion amid an evolving economic environment.

Even with growth easing slightly from June, the latest PMI data indicates that India's manufacturing sector remains on a stable footing, supported by resilient export demand, improving supply chains and continued expansion in factory output. At the same time, slower hiring and lingering geopolitical uncertainties suggest manufacturers continue to navigate a mixed operating landscape, according to the HSBC survey.

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