India's manufacturing growth at 12-month low in December

New Delhi: India’s manufacturing growth slowed to a 12-month low in December amid a softer increase in factory orders and production, a private survey said.

The HSBC India Manufacturing Purchasing Managers Index (PMI), compiled by S&P Global, was recorded at 56.4 in December, down from 56.5 in November. It was 57.5 in October and 56.5 reported in September.

India's manufacturing activity recorded the slowest expansion rate since December 2023, when it reported 54.9. The 50-mark separates expansion from contraction.

"December data showed the sector improving to the least extent in 2024, amid softer increases in output, new orders and stocks of purchases. Rates of growth remained substantial, however, underpinning further expansions in buying levels and employment," the survey said.

"Meanwhile, cost pressures receded and were mild, but charge inflation remained historically high," it added.

According to the survey, at 56.4 in December, the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) indicated a slow improvement in operating conditions.

The headline figure was down from 56.5 in November, but remained above its long-run average of 54.1, thereby signalling a robust rate of growth, it added.

To be sure, India witnessed slow growth in Q2FY25, with manufacturing growth in the September quarter falling to 2.2% from 14.3% in the year-ago second quarter and 7% in the June quarter.

Overall, India’s GDP growth in the September quarter slowed to 5.4%. In the first quarter, India’s GDP growth was 6.7% and 8.2% in the year-ago period. 

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"The latest expansion was sharp, though the joint-slowest in a year (equal to September). Qualitative data suggested that growth was hampered by competition and price pressures," the latest HSBC survey for December said.

"Similarly, factory output rose at a substantial pace that was nevertheless the slowest in 2024. Favourable demand was identified as the main determinant of production growth," it added.

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Interestingly, India's infrastructure output, which accounts for about two-fifths of industrial production, jumped to a four-month high in November, driven by a rise in six of the eight core constituent sectors during the month, according to data released earlier this week.

“India’s manufacturing activity ended a strong 2024 with a soft note amidst more signs of a slowing trend, albeit moderate, in the industrial sector. The rate of expansion in new orders was the slowest in the year, suggesting weaker growth in future production," said Ines Lam, economist at HSBC.

"That said, there was some uplift in the growth of new export orders, which rose at the fastest pace since July. The rise in input prices eased slightly, wrapping up the year when Indian manufacturers felt the strain of sharp cost pressures," Lam added.

On the positive side, the latest PMI manufacturing survey showed the rate of job creation quickened to the fastest in four months during December, with around one in ten companies recruiting extra staff, while fewer than 2% of firms shed jobs.

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"With regards to input inventories, purchasing growth and shorter lead times underpinned another monthly increase. The rate of accumulation was sharp, albeit the weakest since December 2023," it added.

The S&P Global India Manufacturing PMI survey for December was compiled from responses from 400 manufacturers.