New Delhi: Indian manufacturing sector witnessed the fastest improvement in operating conditions in over 17 years in August, driven by an increased production efficiency and healthy demand conditions, a monthly report said Monday.
The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose from 59.1 in July to 59.3 in August, indicating the fastest improvement in operating conditions for 17-and-a-half years.
In the Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.
“India’s manufacturing PMI hit another new high in August, driven by a rapid expansion in production. The increase of US tariffs on Indian goods to 50 per cent might have contributed to the slight easing in new export orders growth, as American buyers refrain from placing orders in the midst of tariff uncertainty,” Pranjul Bhandari, Chief India Economist at HSBC, said.
A steep US tariff of 50 per cent on goods from India took effect August 27. The tariffs – among the highest in the world – include a 25 per cent penalty for buying crude oil from Russia.
Underlying data showed a softer increase in international orders placed with Indian manufacturers. The rise was the weakest for five months, though sharp by historical standards. Firms reported having secured new work from clients in Asia, Europe, the Middle East and the US.
Meanwhile, incoming new orders rose to broadly the same extent as in July, which was the fastest in 57 months. In addition to demand buoyancy, survey participants linked growth to advertising success.
“Overall orders growth, on the other hand, held up much better, suggesting that domestic orders remained robust, helping to cushion against tariff-related drag on the economy. Manufacturers’ continued optimism for future output is a positive sign,” Bhandari said.
Meanwhile, the Indian economy reported a stronger-than-expected 7.8 per cent growth in April-June, its fastest pace in five quarters.
Chief Economic Adviser (CEA) V Anantha Nageswaran has said that the trade impasse with the United States is continuing for the moment, so there will be some impact in the second quarter, as increased tariffs on Indian shipments took effect in August.
He exuded confidence that the tariff impact on growth activities will be contained to the second quarter, and maybe at most a part of the third quarter.
According to the survey, during August, companies upped the pace at which additional materials were bought, and more jobs were created, partly reflecting positive expectations regarding the outlook.
The strongest sales and output performances were noted in the intermediate goods category, followed by capital and then consumer goods.
On the job front, the report said employment rose for the 18th month in a row during August. Despite slowing to the weakest since November 2024, the pace of job creation was historically solid as manufacturers were confident that the output would increase over the course of the coming 12 months.
The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.
PTI
