Manufacturing Activity Hits a 12-Month Low

In December, the manufacturing sector in the country experienced a slowdown, reaching a 12-month low as factory orders and production expanded at a softer rate. Despite this, the sector still showed signs of improvement, albeit to the least extent in 2024, with softer increases in output, new orders, and stocks of purchases.

The HSBC India Manufacturing Purchasing Managers' Index (PMI) stood at 56.4 in December, indicating a weaker improvement in operating conditions. This figure, although down from 56.5 in November, remained above its long-run average of 54.1, signaling a robust rate of growth.

Survey Insights and Future Outlook

Compiled from responses to questionnaires sent to 400 manufacturing sector firms, the survey highlighted that India's manufacturing activity ended a strong 2024 on a softer note. Ines Lam, an economist at HSBC, noted, "The rate of expansion in new orders was the slowest in the year, suggesting weaker growth in future production." However, there was some uplift in the growth of new export orders, which rose at the fastest pace since July.

Looking towards 2025, manufacturers remain optimistic about a rise in output, driven by advertising, investment, and expectations of favorable demand. However, concerns around inflation and competitive pressures may curb sentiment.