India’s manufacturing sector showed steady momentum in January, with the Purchasing Managers’ Index (PMI) rising to 55.4. This was up from 55 in December. It signaled continued expansion.

In PMI terms, a reading above 50 indicates growth, while below 50 signals contraction.

According to the HSBC Global Manufacturing PMI report, domestic demand remained the main growth driver. Consumer goods emerged as the strongest segment. However, capital goods saw the slowest improvement in operating conditions. Export demand picked up from regions including Asia, Australia, Canada, Europe, and the Middle East. However, it stayed at a 15-month low. Charge inflation continued to ease.

Despite the expansion, business confidence weakened and slipped to its lowest level in nearly 3.5 years. Moreover, 83% of firms expect no change in output growth over the next year.

HSBC’s Chief India Economist Pranjul Bhandari noted that expectations for future output fell to their lowest level since July 2022. This happened even as manufacturing activity rebounded. In addition, he added that input costs rose moderately, while factory-gate price growth slowed. As a result, there was mild margin pressure.

On the supply side, input inventories increased as suppliers met rising demand. Meanwhile, finished goods stocks declined for the third consecutive month.

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