Inventory dip & new orders drive India’s manufacturing surge in March

India’s manufacturing purchasing managers’ index (PMI) registered 58.1 in March, up from 56.3 in February. The latest figure signalled a strong improvement in the sector’s health, exceeding the long-run average, according to a report by S&P Global and HSBC.

Manufacturing sector growth in India recovered the ground lost in February, picking up to its highest in eight months as a faster upturn in total sales underpinned a sharper increase in output. March’s acceleration came despite a mild slowdown in international order growth, as per HSBC India Manufacturing PMI report.

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. Firms aimed to counter declining stock levels by acquiring additional inputs for their production processes at the quickest pace seen in seven months.

India’s Manufacturing PMI rose to 58.1 in March from 56.3 in February, marking the highest level in eight months, driven by strong domestic demand.
Firms increased output and input purchases while tapping into inventories, leading to the sharpest fall in finished goods stocks.
Despite mild export growth and rising input costs, business confidence remained high with optimistic output forecasts.

A key driver behind the rise in the PMI was the New Orders Index—its largest sub-component—which saw total sales grow at the strongest pace since July 2024. Companies attributed this to improved customer interest, supportive demand conditions, and effective marketing efforts. As a result, production volumes were ramped up towards the close of the 2024-25 fiscal.

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, added the report.

Where international sales expanded, panellists for this report cited gains from Asia, Europe and the Middle East. Several companies indicated that warehoused goods were used to meet rising sales requirements, which triggered the quickest drop in post-production inventories in over three years. The decline was the fourth in consecutive months and marked overall.

To address potential stockouts, Indian manufacturers stepped up buying activity in March. Inputs were purchased to the greatest extent in seven months, and at a rate that was well above the series average. Despite the upturn in input demand, suppliers to the Indian manufacturing industry were generally able to deliver materials in a timely manner, the report added.

Supplier lead times shortened for the thirteenth consecutive month, though the improvement was the second weakest during this period. Pre-production inventories, however, saw a sharp increase in March—the fastest growth in five months. Data also indicated that capacity pressures remained modest, with outstanding business rising only slightly and at a slower pace than in February. Consequently, firms scaled back their recruitment efforts.

Employment nevertheless rose at solid rate in the context of survey data. Amid reports of higher prices for copper, electronic items, leather, LPG and rubber, cost burdens rose further. The overall rate of inflation accelerated to a three-month high but was well below its long-run average, said the report.

Conversely, there was a softer increase in prices charged for Indian goods. March’s rise was moderate and the weakest in exactly one year. Finally, favourable demand conditions, better customer relations and projects pending approval underpinned upbeat forecasts for output levels in the coming 12 months.

“India registered a 58.1 manufacturing PMI in March, up substantially from 56.3 during the previous month. 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. Business expectations remained 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,” said Pranjul Bhandari, chief India economist at HSBC.

Fibre2Fashion News Desk (SG)

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