India's manufacturing sector demonstrates robust growth in Dec 2023

As per the data, the Manufacturing Purchasing Managers' Index (PMI) fell slightly from 56.0 in November to 54.9 in December, marking an 18-month low. However, this figure still represents a notable improvement in the sector's health, being above the long-term trend. The year ended with the lowest quarterly average since the first quarter of fiscal 2022-23, pointing to a nuanced but positive growth narrative, S&P Global said in a media release.

December's performance was characterised by softer yet sharp increases in factory orders and output. Business confidence regarding the year-ahead outlook strengthened, reflecting optimism driven by new business gains, favourable market conditions, and the success of various trade fairs and expositions.

Importantly, the industry saw a significant easing in inflationary pressures. Input costs rose at the second-slowest rate in nearly three and a half years, and charge inflation softened to a nine-month low. This trend of minimal inflation amidst robust growth signals a well-managed sector adept at navigating cost pressures.

The rate of growth in new orders and production softened, with demand for certain products fading. Yet, the industry's resilience shone through with a twenty-first consecutive increase in international order receipts, highlighting India's strengthening position in the global market, the release added.

Despite the slower expansion pace, December data revealed a continued uptick in purchasing costs, notably in chemicals, paper, and textiles. The sector's adept handling of these costs is evident in the marginal rate of inflation.

Employment in the sector remained largely stable, with only a slight increase in outstanding business volumes. This stability is a positive sign, indicating that firms are managing their resources efficiently and are poised for future growth.

Looking ahead, Indian manufacturers expressed increased optimism for the year ahead, buoyed by advertising strategies, better customer relations, and new enquiries. This forward-looking sentiment, combined with the sustained increase in buying levels and input inventories, positions the sector for continued success into the new year.

Pranjul Bhandari, chief India economist at HSBC, said: "India’s manufacturing sector continued to expand in December, although at a softer pace, following an uptick in the previous month. Growth of both output and new orders softened, but on the other hand, the future output index rose since November. Rates of increase in input and output prices were broadly unchanged."

ALCHEMPro News Desk (KD)