India’s manufacturing sector growth rose to an eight-month high in March, driven by quicker increases in factory orders and production amid buoyant demand conditions, a monthly survey said on Wednesday.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) was at 58.1 in March, up from 56.3 in February, indicating a substantial improvement in the health of the sector that was above its long-run average.

In February, India’s manufacturing PMI fell to a 14-month low amid softer increase in new orders and production.

In PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

Manufacturing sector growth in India recovered the ground lost in February, largely driven by a stronger contribution from its largest sub-component: the New Orders Index.

“March saw total sales expand to the greatest extent since July 2024, with companies remarking on positive customer interest, favourable demand conditions and successful marketing initiatives,” the survey noted.

Accordingly, firms scaled up production volumes at the end of the 2024/25 fiscal year. The rate of expansion was sharp, above its historical average and the strongest in eight months.

Although new export orders continued to increase strongly in March, the pace of growth retreated to a three-month low. Panellists cited gains from Asia, Europe and the Middle East in terms of international sales.

“Although international orders slightly slowed, overall demand momentum remained robust, and the new orders index recorded an eight-month high of 61.5. Strong demand prompted firms to tap into their inventories, causing the fastest drop in finished goods stocks in over three years,” said Pranjul Bhandari, Chief India Economist at HSBC, said.

Buoyant demand led companies to tap into their inventories to meet increased client appetite, resulting in the most rapid decline in finished goods stocks since January 2022.

The survey participants underpinned upbeat forecasts for output levels in the coming 12 months on favourable demand conditions, better customer relations and projects pending approval.

“Going ahead, business expectations remained fairly optimistic, with around 30 per cent of survey participants foreseeing greater output volumes in the year ahead, compared to less than 2 per cent that anticipate a contraction,” Bhandari said.

The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. 

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