India’s Manufacturing Growth Moderates in October as Export Orders Reach Six-Month High

NEW DELHI, Nov 2: India’s manufacturing sector maintained its expansionary momentum in October, although the pace of industrial growth moderated slightly as domestic demand and factory output showed signs of slowing. Strong overseas orders and easing cost pressures, however, provided support to manufacturers.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, declined to 54.7 in October from 55.1 in September, according to survey findings released on Monday.

Despite the decline, the index remained comfortably above the 50-point threshold that separates expansion from contraction, indicating that manufacturing activity continued to grow.

The latest figures suggest that Indian manufacturers are continuing to benefit from favourable demand conditions, although the pace of improvement has become less pronounced compared with previous months.

One of the most encouraging developments was the increase in international demand. New export orders expanded at their fastest rate in six months, reflecting stronger business opportunities across several overseas markets.

Manufacturers reported increased orders from countries including Bangladesh, Canada, Indonesia, Nepal, Oman, Saudi Arabia, Sri Lanka, the United Kingdom, the United States and the United Arab Emirates.

The improvement in export demand helped offset some weakness in domestic orders and supported continued expansion in factory production.

According to the survey, new business increased sharply during October, although the overall pace of growth eased slightly from September’s seven-month high. Companies attributed the improvement to new customer acquisitions, successful marketing initiatives and stronger demand for their products.

Pranjul Bhandari, chief India economist at HSBC, said manufacturing activity remained firmly in expansionary territory despite the moderation in the latest reading.

She highlighted the contribution of international demand to factory performance and noted that manufacturers had increased their inventories to prepare for possible supply shortages and meet production requirements in an uncertain global environment.

The survey also indicated an improvement in inflation-related conditions across the manufacturing industry. Although companies continued to face higher prices for certain raw materials and energy-related inputs, the overall rate of input cost inflation declined to its lowest level since February.

More significantly, the increase in selling prices slowed to its weakest pace in nearly four years. This suggests that manufacturers are exercising greater restraint when passing higher production expenses on to customers.

The moderation in selling-price inflation could provide some relief to businesses and consumers, particularly as companies continue to navigate changing input costs and competitive market conditions.

However, the employment picture remained relatively subdued. Manufacturing companies increased their workforce for the second consecutive month as higher production requirements created additional staffing needs.

Nevertheless, the pace of recruitment slowed compared with September. While some manufacturers expanded their teams, companies in the capital goods segment reported reductions in employment.

The survey also recorded an increase in outstanding business volumes for the seventh consecutive month, although the overall accumulation remained marginal. This indicated that manufacturers continued to handle additional workloads without a substantial rise in unfinished orders.

Another notable development was the increase in inventory levels. Companies accumulated finished goods at a record pace during October, reflecting efforts to maintain adequate supplies and respond to anticipated customer requirements.

Inventories of production inputs also increased, with the pace of accumulation reaching an eight-month high. Manufacturers appeared to be building precautionary stocks to protect their operations against potential supply disruptions.

However, purchasing activity expanded at its slowest pace in 64 months, suggesting that businesses were becoming more cautious about fresh procurement despite maintaining higher inventory levels.

Business confidence also weakened during the month. Manufacturers became less optimistic about production prospects over the next 12 months, with overall sentiment remaining below its long-term average.

Only around 18 per cent of surveyed companies expected production to increase over the coming year, while the remaining respondents anticipated broadly unchanged activity.

Expectations of stronger customer demand, new business enquiries and growing requirements for industrial automation and technology solutions continued to provide some encouragement.

The latest manufacturing figures come at a time when India’s broader economy is showing signs of resilience despite international uncertainties, fluctuating energy prices and changing global trade conditions.

Strong export orders represent an important opportunity for domestic manufacturers, particularly as companies seek to expand their international presence and diversify their customer base.

At the same time, the moderation in domestic orders, employment growth and business confidence highlights the challenges facing the sector.

Manufacturers will need to balance production requirements with inventory management, cost control and changing demand conditions in the coming months.

The performance of the manufacturing industry will also remain closely linked to global economic developments, commodity prices, supply-chain stability and domestic consumption.

While October’s PMI reading confirms that industrial activity continues to expand, the slower pace of growth indicates that businesses are approaching the coming months with a degree of caution.

The strong performance of export orders and easing inflationary pressures nevertheless provide a positive foundation for the sector as it moves further into the third quarter of the financial year.