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India’s manufacturing sector saw strong growth in July, with the Manufacturing Purchasing Managers’ Index (PMI) rising to 59.1. This is the highest level in 16 months, up from 58.4 in June. The increase was mainly due to higher demand, more new orders, and a buildup of inventories, according to the HSBC India Manufacturing PMI data.
The report showed that new orders grew at their fastest pace in almost five years. This growth was supported by strong domestic demand and improved marketing by companies. Production levels also reached a 15-month high. Among the different types of manufacturers, those making intermediate goods saw the sharpest rise in output, while other categories expanded at a slower pace.
Input buying also rose as companies restocked to meet demand. Though slightly lower than in June, the pace was still the second-quickest in over a year. Better delivery times from suppliers also helped companies increase their stock of raw materials, which grew at the strongest rate in 15 months. However, inventories of finished goods continued to fall in July as businesses fulfilled orders using existing stock.
Even though production and orders surged, job creation in the sector showed signs of slowing. According to the report, hiring rose at the weakest rate since November 2024. Businesses still added workers at the beginning of the second quarter, but not as actively as before. This suggests that while companies are busy, they may be cautious about increasing staff in the face of possible challenges.
Business confidence also dropped, reaching its lowest point in three years. The report mentioned that concerns around competition and inflation were among the main reasons for this decline in outlook. These factors may have made companies more careful about hiring or making big investments.
International demand also helped boost overall sales, but growth in export orders was slower than in June. Still, the report said export growth remained one of the strongest seen in more than 14 years. At the same time, companies faced higher costs for materials and other inputs. Although the increase in costs was not extreme, it was stronger than earlier months.
To manage these rising input costs, many firms raised their selling prices. The rate of price increase was above the long-term average, suggesting that some of the extra expenses were passed on to customers. This could be a sign of inflation pressures building within the sector.
Overall, July showed strong signs of momentum in India’s manufacturing sector. But the slower hiring and dip in confidence point to a cautious outlook for the months ahead. Despite the challenges, companies continued to invest in raw materials and maintained production to keep up with the growing demand.