India's manufacturing purchasing manager’s index surged to a three-month high at 56.4 in March as factory orders and output expanded at the fastest rates in three months, according to S&P Global India Manufacturing PMI report. In February, the country’s manufacturing PMI stood at 55.3, whereas in January it was 53.7.

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

However, the PMI average for the fourth quarter for FY23 stood at 55.7, as against 56.3 in Q3 of FY23.

"Underlying demand for Indian goods remained strong in March, underscored by the quickest upturn in factory orders for three months. Hence, production continued to expand at a robust clip and firms stepped up their stocks building efforts. Companies reported abundant capacity among themselves and their suppliers. Pending workloads expanded only marginally in March, hindering job creation. As for supply chains, improved availability of raw materials among vendors resulted in shorter delivery times and retreating price pressures. Overall, input costs rose at the second-slowest rate since September 2020," says Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

With pressure on supply chains subsiding and raw material availability improving, input cost inflation retreated to its second-lowest mark in two-and-a-half years, the report says.

"March data highlighted a further upturn in new business placed with the domestic manufacturers. Moreover, the rate of expansion was sharp and the quickest in three months. Firms suggested that marketing efforts bore fruit. Demand resilience and competitive pricing were also cited as growth drivers. Continuing the trend that has been recorded every month for a year, new export orders rose in March. The expansion rate quickened from February, though it remained slight and historically subdued," it adds.

Demand resilience also encouraged firms to rebuild their input inventories. The stocks of purchases rose at a sharp rate that was one of the strongest seen in over 18 years of data collection, as per the rating agency.

"Firms tried to benefit as much as possible from this moderation in inflation by acquiring additional raw materials and semi-finished items. This contributed to one of the strongest increases in input inventories in over 18 years of data collection. "Although manufacturers were upbeat towards future new orders, they somewhat doubted that inflation would continue to recede. Such worries restricted optimism towards output prospects,” De Lima says.

Supporting the upturn in input stocks was a twenty-first consecutive increase in buying levels. Purchasing activity expanded at a marked pace that was the strongest since May 2022.

For FY24, the report says that Indian manufacturers expect improved customer relations, new product releases and advertising to support sales and production.

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