India’s Factory Growth Slows To 54.7 In October As Domestic Demand Weakens, Export Orders Surge

India’s manufacturing sector lost some momentum in October as domestic demand weakened and factories slowed hiring. However, stronger overseas demand offered support, with export orders recording their fastest growth in six months, highlighting the mixed trends shaping the country’s industrial outlook.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, eased to 54.7 in October from 55.1 in September, falling below the preliminary estimate of 54.9 released earlier. Despite the decline, the index remained comfortably above the 50-point mark, which separates expansion from contraction, and its long-term average.

New orders, a key indicator of demand, grew at a slower pace after reaching a seven-month high in September. However, new export orders increased at their fastest pace in six months, supported by stronger demand from international markets, including the United States, the United Kingdom, the UAE, Saudi Arabia, Bangladesh, Canada, Indonesia, Nepal, Oman and Sri Lanka. Companies attributed the increase to favourable demand conditions, new client acquisitions and successful marketing campaigns.

Factory output continued to expand at a sharp pace, remaining above its long-term average, but growth moderated from September, particularly among intermediate goods manufacturers. Employment increased for the second consecutive month as production requirements and workloads rose. However, hiring slowed, with capital goods manufacturers cutting jobs. Outstanding business volumes also increased for the seventh consecutive month, although the rise was marginal.

Another significant development was the record accumulation of finished goods inventories. Manufacturers increased their stocks at the fastest pace in the survey's more than 21-year history, citing strong demand and efforts to prevent shortages. Meanwhile, growth in raw material purchasing slowed to its weakest level during the 64-month expansion period. Input inventories, however, increased at their fastest pace in eight months as companies built precautionary buffers against potential supply disruptions.

The survey also brought relief on the inflation front. Input cost inflation fell to its lowest level since February, despite higher prices for some materials and energy. Meanwhile, factory selling price increases slowed to their weakest pace in nearly four years, indicating limited pricing power.

Despite continued expansion, business confidence weakened compared with September and remained below its long-term average. Only around 18 per cent of manufacturers expected output to increase over the next 12 months, supported by fresh client enquiries and demand for industrial automation and technology solutions.