What’s the story
India‘s manufacturing sector slowed down in December 2024, with the Purchasing Managers’s Index (PMI) falling to a 12-month low of 56.4. The number, released by a private sector survey on January 2, shows a marginal decline from November’s PMI of 56.5. The HSBC India Manufacturing PMI had earlier declined from an October high of 57.5, making December the second month of consecutive decline in activity.
Annual average PMI surpasses previous year’s figure
Despite the recent dip, the annual average for the index in 2024 was over 57.5, beating last year’s average of 56.8. Commenting on this trend, Ines Lam, an economist at HSBC, said, “India’s manufacturing activity ended a strong 2024 with a soft note amidst more signs of a slowing trend, albeit moderate, in the industrial sector.”
New orders growth slows, export orders rise
Notably, the rate of new orders growth in December was the slowest in a year. However, there was a silver lining as new export orders increased at their fastest pace since July 2024, HSBC’s report stated. This indicates that while domestic demand may be slowing down, international demand for Indian goods is on the rise.
Inflation trends and employment growth
On the inflation front, input inflation fell from last month while charge inflation accelerated faster, reflecting improved pricing power for firms. HSBC observed that “anecdotal evidence showed that demand resilience supported pricing power.” There was also positive news on the employment front as job creation hit its fastest pace in four months with “around one-in-10 companies recruited extra staff, while fewer than 2% of firms shed jobs,” according to HSBC’s report.
Future outlook amid inflation and competition concerns
Looking ahead, the 2025 outlook is stronger despite fears of rising competition and higher inflation. HSBC’s survey of 400 manufacturers found that “optimism reflected advertising, investment and expectation of favorable demand.” However, this optimism was curbed by fears of inflation and competitive pressures. The Indian economy slumped in Q2 with growth hitting a seven-quarter low of 5.4%, further emphasizing the challenges faced by the manufacturing sector.