India’s manufacturing output at 4-month high in April on robust demand for new orders

India's manufacturing purchasing manager’s index surged to a four-month high at 57.2 in April as factory orders expanded at the fastest rates in four months, according to the S&P Global India Manufacturing PMI report. In contrast to this, the country's manufacturing PMI for March stood at 56.2, in February it was 55.3 and in January it was 53.7.

A reading above 50 indicates an overall increase in output compared to the previous month. 

"Reflecting a robust and quicker expansion in new orders, production growth took another step forward in April. Companies also benefited from relatively mild price pressures, better international sales and improving supply-chain conditions," says Pollyanna De Lima, Economics Associate Director, S&P Global Market Intelligence says.

With this, the buying levels also expanded for the twenty-second successive month and were the strongest since February 2021.

According to the report, new orders placed with goods producers rose at the quickest pace since December last year. The rate of expansion was sharp and above its long-run average, owing to favourable market conditions, demand strength and publicity.

The report says that factory orders and production rose at the strongest rates in April so far this year, with the creation of more jobs during the month and companies stepping up input purchasing owing to stock-replenishment efforts.

During the month, inventories of inputs witnessed record expansion, supported by a lack of pressure on supplier capacity. Robust new business growth and an associated increase in production requirements urged manufacturers to add to their input inventories in April. The rate of stock accumulation also climbed during the month. As many as 26% of surveyed participants reported higher production volumes citing sustained expansion in sales.

The upturn in holdings of raw materials and semi-finished items was facilitated by purchasing activity growth. Despite the surge in purchasing activity, suppliers were able to deliver inputs in a timely manner during April. The vendor performance improved to the greatest extent in eight months, though only slightly overall. Although manufacturers signalled higher operating costs in April — linked to fuel, metals, transportation and some other raw materials — the overall rate of inflation remained below its long-run average despite quickening since March.

"It seems like Indian manufacturers have abundant opportunities to keep powering ahead. Besides seeing the strongest inflow of new work in 2023 so far, capacities were expanded through job creation, input buying was lifted and pre-production inventories rose at a record rate. At the same time, stocks of finished goods need replenishing as some orders were reportedly fulfilled from warehoused goods. Manufacturers are certainly upbeat towards growth prospects, with optimism improving from March's eight[1]month low on the back of contracts pending approval, rising client enquiries, marketing initiatives and evidence of demand resilience," Lima says.

For FY24, S&P Global had earlier said that Indian manufacturers expect improved customer relations, new product releases and advertising to support sales and production.