In April, India's manufacturing sector experienced a slight moderation in growth but remained robust, marking the second-best improvement in operating conditions in three-and-a-half years. According to the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI), the index fell from 59.1 in March to 58.8 in April. However, the PMI still indicated a significant improvement in demand, prompting firms to increase their purchases of raw materials at a near-record pace, as per a private survey released on Thursday.

In PMI terms, a score above 50 signifies expansion, while a score below 50 indicates contraction. Pranjul Bhandari, chief India economist at HSBC, noted, “April’s manufacturing PMI recorded the second fastest improvement in operating conditions in three-and-a-half years, bolstered by strong demand conditions which resulted in a further expansion of output, albeit slightly slower than in March."

The survey highlighted that Indian manufacturers witnessed robust demand for their goods in April, both from domestic and external clients. Total new orders surged sharply, with the pace of expansion being the second strongest since the beginning of 2021. Additionally, new export orders increased significantly in April, although at a softer rate compared to total sales, indicating that the domestic market remained the primary driver of growth.

Bhandari further explained, “Improvements in suppliers’ delivery times contributed to increased purchasing activity. Additionally, a positive outlook for the year ahead prompted firms to expand their staffing levels." Despite higher costs of raw materials and labor leading to a modest uptick in input costs, inflation remained below the historical average. However, firms passed these cost increases onto consumers through higher output charges, as demand remained resilient, resulting in improved margins.