India’s manufacturing activity declined to a three month low of 57.6 compared with 58.2 in the previous month, as price pressures and India-Pakistan conflict hampered growth in new orders, showed private sector survey results on June 2.
May marks the first decline in the HSBC India Manufacturing Purchasing Managers' Index since US President Donald Trump imposed reciprocal tariffs, raising import costs to highest level witnessed in nearly a century. The conflict between India and Pakistan weighed on demand, according to the companies surveyed.
However, the value remained higher than the long-run average of 54.1.
"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," said Pranjul Bhandari, chief India economist, HSBC.
The survey highlighted that new export orders rose at one of the strongest rates recorded in three years, with manufacturers noting a favourable demand from Asia, Europe, the Middle East and the US.
Cost pressures remained a concern for the 800 manufacturers surveyed in May, with companies highlighting a rise in aluminium, cement, iron, leather, rubber and sand prices. The rate of input inflation rose to the highest level since November 2024, but pricing power ensured that companies could charge more as well.
"Input cost inflation is picking up, but manufacturers seem to be able to lessen the pressure on profit margins by raising output prices," Bhandari said.
Indian manufacturers remained strongly confident of a rise in output over the course of the coming 12 months. Among the main opportunities to growth, they remarked on advertising and new customer enquiries, as per the release.
Services activity, for which data will be released on June 4, is likely to perform better with preliminary data showing the index value rising to highest level in 14-months.
Indian economy performed well in the January-March quarter as growth rose to a four-quarter high of 7.4 percent compared with 6.4 percent in the previous month.
The high growth pushed India’s GDP growth to 6.5 percent, in line with the RBI set target. The central bank has been targeting 6.5 percent growth in the current fiscal as well, while the MC poll of 20 economists pegged the median at 6.3 percent.
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