India's manufacturing sector experienced sluggish activity in November, as input costs surged to their highest level in 44 months, according to the HSBC India Manufacturing Purchasing Managers' Index (PMI). The headline PMI stood at 56.5 in November, down from 57.5 in October, indicating a slower pace of expansion.
Key Findings from the PMI Report
The HSBC PMI report, compiled by S&P Global, revealed that output and new orders rose at softer rates compared to the previous month. Export orders also showed a marginal slowdown, although they remained in expansion territory. The input cost index jumped to its highest since March 2021, driven by higher prices for raw materials such as chemicals, metals, and plastics.
Impact on Businesses
Manufacturers reported passing on some of the increased costs to consumers, as output prices rose at a faster pace. However, the rate of inflation remained moderate compared to input cost pressures. Employment in the sector continued to grow, but at a slower pace, reflecting cautious optimism among firms.
According to Pranjul Bhandari, Chief India Economist at HSBC, “The manufacturing sector continued to expand, but the pace moderated. Input cost pressures intensified, and firms raised selling prices accordingly. The overall outlook remains positive, but the sustainability of demand will be key in the coming months.”
Regional and Sectoral Trends
The report highlighted that consumer goods remained the best-performing category, while intermediate goods saw a slight slowdown. Capital goods production also expanded, though at a weaker rate. On the regional front, all three monitored regions—East, West, and South—recorded slower growth, with the West experiencing the most significant deceleration.
Future Outlook
Despite the slowdown, business confidence improved slightly, with firms optimistic about future output. However, concerns over inflation and global demand uncertainties persisted. The PMI data suggests that the Reserve Bank of India may face challenges in managing inflation while supporting growth.
Overall, the November PMI reading indicates that India's manufacturing sector is navigating a phase of moderated expansion amid rising cost pressures and mixed demand conditions.
