India’s manufacturing PMI accelerated to 59.2 in October, up from 57.7 during the month prior, indicating a quicker improvement and continued strength of the manufacturing sector, buoyed by GST (Goods and Services Tax) relief, productivity gains and tech investment, the HSBC data released on November 3 shows. A faster increase in new orders boosted growth of output and buying levels, and the latter drove a near-record expansion in input inventories.

"Robust end-demand fuelled expansions in output, new orders, and job creation. Meanwhile, input prices moderated in October while average selling prices increased as some manufacturers passed on additional cost burdens to end-consumers. Looking ahead, future business sentiment is strong due to positive expectations around GST reform and healthy demand," said Pranjul Bhandari, Chief India Economist at HSBC.

The HSBC survey new orders increased further at the start of the third fiscal quarter, with companies attributing growth to advertising, buoyant demand and the GST reforms. Moreover, the pace of expansion was sharp and stronger than that recorded in September. Similarly, the growth of output quickened from the previous month. Matching that seen in August, the rate of expansion was the joint-best in five years. October data showed that the pick-up in sales growth mainly stemmed from the domestic market, as new export orders increased at a softer rate.

Despite global tensions, demand for Indian exports improved. "The latest improvement in international demand for Indian goods was marked, though the least pronounced in the calendar year-to-date. Manufacturers continued to purchase additional raw materials and semi-finished items in October, reportedly to supplement production and add to their inventories," the Survey finds. Notably, buying levels expanded at the fastest pace since May 2023. The HSBC survey attributes support to input purchasing growth, to was a notable softening of cost inflation. Also, the latest rise in overall expenses was modest, the weakest in eight months and well below the long-run series average.

Despite receding cost pressures, the rate of charge inflation matched that registered in September, and was the joint-highest in 12 years. Survey participants stated that demand strength was the key factor behind the current hike in output prices. Also, some firms suggested that greater outlays on freight and labour were transferred through to customers. "Job creation entered its twentieth consecutive month in October. The rate of expansion was moderate and broadly similar to September."

Holdings of raw materials and semi-finished items increased at the second-fastest rate since data collection began in March 2005 (behind May 2023). Survey members say demand buoyancy encouraged them to lift stocks. Finished goods inventories likewise rose, but here the pace of accumulation was only marginal as firms often fulfilled sales from warehoused products. Regarding the outlook, manufacturers attributed positive expectations to GST reform, expanded capacities and marketing efforts. They also predicted demand resilience and hope that pending contracts will be approved.