India's February manufacturing PMI rises to 56.9, highest in 5 months

India’s manufacturing Purchasing Managers’ Index has been above the crucial 50 level for 32 months in a row.

India's manufacturing activity continued to expand in February with the HSBC Purchasing Managers' Index (PMI) for the sector coming in at 56.9, data released on March 1 showed.

At 56.9, the February manufacturing PMI is above the flash estimate of 56.7 released on February 22 and is the highest in five months. It is also above the key level of 50, which separates expansion in activity from contraction, for the 32nd month in a row.

"The HSBC final India Manufacturing PMI indicates that production growth continued to be strong, supported by both domestic and external demand," said Ines Lam, an economist at HSBC.

"Manufacturing firms' margins improved as input price inflation slipped to the lowest since July 2020. Buoyed by robust demand and improving profit margins, manufacturers have an optimistic outlook about future business conditions," Lam added.

The latest PMI number comes a day after the statistics ministry said India's GDP grew by 8.4 percent in October-December 2023, with growth in the manufacturing sector's gross value added moderating to 11.6 percent from 14.4 percent in the previous quarter.

The manufacturing PMI had averaged 57.9 in July-September 2023 and 55.5 in the subsequent quarter. In the first two months of 2024, it has averaged 56.7.

Also Read: PMI or GVA – Which is the true manufacturing sector indicator?

Manufacturing sector growth as per the GDP data and the sector's PMI are not strictly comparable. While the former is based on actual activity, the PMI is survey-based data. Further, growth in gross value added is a year-on-year comparison, while the PMI looks at sequential change, among other differences.

As per the PMI data released on March 1, orders rose at the quickest pace since September 2023 in February, with new export orders rising at the fastest rate in nearly two years, index compiler S&P Global said.

However, the rise in orders added little pressure on the capacities of Indian manufacturers, with pending work only increasing slightly. In fact, the increase in pending work in February was lower than in January. As a result, manufacturing sector employment was little-changed in February, with S&P Global noting that manufacturers see current staff levels "sufficient for current requirements".

Meanwhile, input price inflation in February was the weakest since August 2020, while prices charged by manufacturers rose at an even softer rate.

"Among the 8 percent of panellists that hiked their fees, there were mentions of the passing on of greater freight, material, and wage costs to clients," S&P Global said.