India's manufacturing sector has experienced a sustained expansion in February, although it has slowed down from January levels, with the growth rate falling to a 14-month low, according to a report from S&P Global released on Monday. The seasonally adjusted manufacturing purchasing managers index (PMI) for India recorded a value of 56.3 in February, down from 57.7 in January.
Despite this drop, the PMI figure remains significantly above the 50-point benchmark that indicates growth, as highlighted by the monthly PMI survey conducted by S&P Global. This sustained growth is impressive, marking 44 consecutive months of expansion in India's manufacturing PMI, with February's performance suggesting a continued robust improvement in the sector's health. The data reflects the robust domestic and international demand feeding into the manufacturing landscape, prompting factory managers throughout India to increase their workforce and ramp up their purchasing of necessary inputs.
As stated by the report, 'Favorable domestic and international demand prompted firms to increase purchasing activity and hire extra workers at above-trend rates.' The hiring levels observed during this period were the second-highest in the entire history of the survey, only surpassed by the levels recorded in January. Optimism remains high among manufacturing sector leaders concerning growth prospects in the upcoming 12 months, primarily driven by client demand.
The report indicated that factory managers expressed strong confidence in the sector's potential for further growth, influenced by sustained market demands. However, it is important to note that while India’s factories are witnessing increased input costs in February—including costs associated with labor—there has been a notable easing of overall input inflation.
Specifically, the rate of input inflation has decreased for the third consecutive month, reaching its lowest point in a year. This presents a positive sign amid the challenges posed by rising costs. Despite the challenges, factory managers are responding to strong demand by passing on increased labor costs to their clients.
In February, manufacturers 'passed on higher labor costs to clients, facilitated by favorable demand conditions,' as noted by S&P Global. Looking forward, the strength exhibited in India's manufacturing sector may be set to persist, especially considering the recent forecasts released by the Reserve Bank of India (RBI), which anticipates a GDP growth of 6.7% in fiscal 2025, beginning April 1.
These projections, if accurate, could herald further positive trends within the manufacturing environment in India. The PMI report for February was compiled from survey responses received from 400 manufacturers between February 6 and February 24, thus providing a comprehensive snapshot of the current state of India's manufacturing landscape..