India's Manufacturing PMI Stays Resilient Amid Rising Costs: Report The seasonally adjusted Manufacturing Purchasing Managers' Index (PMI) fell from 58.2 in April to 57.6 in May, marking a three-month low.
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India's manufacturing sector continued to show strong momentum in May, registering another month of solid growth in business conditions. Despite a slight dip in the headline figures, the data paints a picture of a sector that is holding firm against multiple headwinds—from inflation and stiff competition to geopolitical uncertainty.
The seasonally adjusted Manufacturing Purchasing Managers' Index (PMI) fell from 58.2 in April to 57.6 in May, marking a three-month low. Still, it remained well above the neutral threshold of 50.0 and significantly higher than the long-run average of 54.1. The survey, compiled by S&P Global, suggests that while the rate of improvement has moderated, the underlying momentum in the sector remains robust.
"India's May manufacturing PMI signalled another month of robust growth in the sector, although the rate of expansion in output and new orders eased from the previous month," noted Pranjul Bhandari, chief India economist at HSBC. Her assessment aligns closely with the report's findings, which indicate that although output and new orders lost some steam, both metrics remained strong by historical standards.
Demand—both domestic and international—continued to underpin the sector's performance. The report states that successful marketing strategies and steady interest from key global markets such as Asia, Europe, the Middle East, and the US contributed to a sustained influx of new export orders. In fact, new export orders rose at one of the fastest paces recorded in the past three years, a clear sign of India's increasing integration into global supply chains.
This demand has spurred manufacturers to act. Input buying remained aggressive, and the sector saw a record surge in hiring. Among companies that reported increased headcounts, 12 per cent of the total surveyed, there was a marked preference for permanent hires over short-term staffing. This hiring boom helped manufacturers manage workloads effectively, leading to a rare stabilisation in outstanding business volumes after six months of accumulation.
Bhandari underscored the significance of this labour market trend: "The acceleration in employment growth to a new peak is certainly a positive development." Her observation is grounded in the report's data, which highlights that job creation reached its highest level since the series began—an indicator of rising business confidence and long-term planning.
Yet, the optimism is tempered by persistent inflationary pressures. Input costs rose at the fastest pace in six months, with manufacturers citing higher prices for aluminium, cement, iron, leather, rubber, and sand. Freight and labour costs also edged up. This squeeze on margins prompted companies to increase their selling prices to one of the largest extents seen in nearly a dozen years.
"Input cost inflation is picking up, but manufacturers seem to be able to lessen the pressure on profit margins by raising output prices," Bhandari added. The report supports this view, noting that the rate of charge inflation remained elevated and above the long-run average, as firms capitalised on strong demand to pass on costs.
Supply chain dynamics also offered a silver lining. Vendors were more efficient in May, with average lead times shortening to the greatest degree in four months. This allowed firms to build up inventories of purchases at one of the fastest rates since August 2024. However, finished goods inventories declined for the sixth consecutive month, reflecting sustained product movement and possibly efforts to keep inventory lean amid cost concerns.
Despite the turbulence—rising costs, fierce competition, and ongoing tensions between India and Pakistan—confidence in future output remains high. The data may not tell a story of unbridled acceleration, but it does speak to a sector that is adapting, investing, and pushing forward. The Indian manufacturing engine is still very much running strong.
