India’s manufacturing sector continued its growth momentum in May, with factory activity accelerating to a three-month high, supported by strong domestic demand, higher production levels, and increased purchasing activity. According to data released by S&P Global on Monday, the HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 55.0 in May from 54.7 in April.
The latest reading was also higher than the preliminary estimate of 54.3 released last month, indicating that manufacturing activity expanded at a faster pace than initially expected. A PMI reading above 50 signifies expansion in the sector, while a reading below that threshold indicates contraction.
The improvement in manufacturing performance was largely driven by robust new order inflows from the domestic market. Companies reported healthy demand conditions, which encouraged them to increase production and replenish inventories. Although export orders continued to rise during the month, the pace of growth slowed compared to April. Manufacturers cited sustained demand from key international markets, including parts of Asia, Europe, Kenya, Nigeria, and West Asia.
Industry experts noted that businesses appeared to be preparing for potential supply chain disruptions by building inventories. Pranjul Bhandari, Chief India Economist at HSBC, said the latest PMI data suggested that firms may be engaging in precautionary stockpiling amid ongoing geopolitical uncertainties in West Asia.
“India’s final manufacturing PMI points to another month of possible precautionary stockpiling as the West Asia conflict remains unresolved. Output growth accelerated, while purchasing activity and stocks of finished goods rose at a faster pace,” Bhandari said.
The survey highlighted a significant rise in production levels, with manufacturers increasing output to meet growing demand. Purchasing activity also strengthened, reaching its highest level in three months as firms stepped up procurement of raw materials.
At the same time, businesses continued to build inventories as a safeguard against future supply disruptions and rising costs. Stocks of finished goods increased for the second consecutive month and expanded at the fastest rate recorded in more than ten years. This trend reflects growing confidence among manufacturers regarding future sales prospects despite external challenges.
However, cost pressures remained a concern for the sector. Input cost inflation stayed among the strongest levels seen in nearly four years. Survey respondents reported higher expenses related to energy, fuel, transportation, and raw materials, largely linked to the ongoing tensions and conflict in West Asia.
Despite elevated input costs, manufacturers were cautious about passing the entire burden onto customers. Output price inflation eased during the month, suggesting that companies absorbed part of the cost increase, potentially putting pressure on profit margins.
The employment outlook remained positive, with firms continuing to hire additional workers to support rising production requirements. Job creation reflected confidence in sustained demand and business expansion plans.
Business sentiment also remained upbeat during May. Manufacturers expressed optimism about future growth, supported by strong order books, marketing initiatives, and expectations that inflationary pressures could moderate later in the year. Many companies anticipate that easing cost pressures and stable demand conditions will support continued expansion in the coming months.
The PMI is calculated as a weighted average of key indicators, including new orders, output, employment, supplier delivery times, and stocks of purchases. The latest reading reinforces the resilience of India’s manufacturing sector, which continues to benefit from strong domestic consumption and proactive inventory management despite global economic uncertainties and geopolitical risks.
With production, employment, and purchasing activity all showing improvement, the manufacturing sector remains an important pillar of India’s economic growth, providing a positive signal for industrial activity in the months ahead.
Author: Shivam
Shivam Dwivedi is a senior journalist with extensive experience in research-driven journalism, policy communication, and multi-platform storytelling. His areas of interest include international relations, defence, science & technology, education, urban development, agriculture, spirituality, and environmental sustainability. His work focuses on in-depth analysis, public discourse, and impactful narratives across governance and development sectors, with a strong commitment to the Sustainable Development Goals (SDGs). Contact: [email protected]
