India's manufacturing sector witnessed a deceleration in February 2025, with the HSBC India Manufacturing Purchasing Managers' Index (PMI) dropping to 56.3 from January's 57.7, marking a 14-month low. Despite the decline, the sector remains in expansionary territory as any PMI reading above 50 signals growth.
Key Highlights:
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Manufacturing PMI: The February PMI of 56.3 is the lowest since December 2023. However, it still indicates positive growth, reflecting continued sectoral expansion.
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Employment Growth: Workforce expansion remained a bright spot, with February showing the second-best rate of job creation in the index's history, following a record high in January.
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Global Demand: New export orders grew significantly, driven by robust international demand for Indian goods.
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Cost Trends: Input cost inflation slowed to its lowest pace in a year, although strong demand kept selling prices elevated.
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Optimistic Outlook: Business sentiment stayed strong, with about one-third of surveyed firms expecting higher production levels in the coming year.
Factors Contributing to the Slowdown:
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Weak Global Demand: A challenging global trade environment and protective policies in key markets impacted India's exports.
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Commodity Price Declines: Falling prices for metals and oil have adversely affected major sectors like chemicals and metal products.
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Seasonal Disruptions: Variations in domestic seasonal conditions, including monsoon-related impacts, disrupted manufacturing activities.
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Supply Chain Issues: Global supply chain bottlenecks, particularly in Europe and parts of Asia, continued to weigh on production.
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Sectoral Disparities: Growth across manufacturing sub-sectors was uneven, with textiles, machinery, and metals facing challenges due to lower global demand and price pressures.
Economic Resilience
Despite the slowdown, India's manufacturing sector demonstrated resilience with continued workforce expansion and strong export growth. The positive outlook among manufacturers indicates confidence in the sector's ability to recover and maintain expansion in the coming months.
India's manufacturing growth story, while momentarily tempered, highlights its enduring capacity to adapt and thrive in a challenging global environment.
