India Manufacturing Activity Picks Up In May, Strong Demand & Output Push PMI To 3-Month High

New Delhi: India's manufacturing sector showed stronger growth in May as demand and production improved across industries.

According to HSBC India Manufacturing PMI data released on Monday, the Purchasing Managers' Index (PMI) rose to 55.0 in May, higher than 54.7 in April and above the flash estimate of 54.3. A PMI reading above 50 indicates expansion in business activity.

The latest figure marks the strongest improvement in the health of the manufacturing sector in the last three months.

New Orders and Output Increase

Manufacturers reported stronger growth in both new orders and production during May. The increase was mainly supported by healthy domestic demand and fresh business opportunities.

Companies involved in intermediate and capital goods recorded faster growth, while consumer goods makers saw slower expansion.

Businesses said infrastructure projects, strong customer demand and new orders helped boost production levels during the month.

Firms Increase Buying and Stock Levels

The survey showed that manufacturers increased their purchasing activity at a faster pace. Companies also raised inventories of finished goods, suggesting that some firms may be building stocks as a precaution.

Pranjul Bhandari, Chief India Economist at HSBC, said the data points to another month of possible precautionary stockpiling as uncertainty linked to the Middle East conflict continues.

She noted that output growth accelerated during May, while purchases of raw materials and stocks of finished products also increased.

Export Growth Slows but Remains Strong

While domestic demand remained the main driver of growth, export orders also increased during the month, though at a slower pace than before.

Manufacturers reported higher sales to several overseas markets, including parts of Asia, Europe, Kenya, Nigeria and the Middle East.

Rising Costs Remain a Concern

Input costs continued to rise in May, driven by higher spending on energy, fuel, raw materials and transportation.

Although input cost inflation eased slightly compared to April, it remained among the highest levels seen in nearly four years.

At the same time, companies increased selling prices at a slower pace, which could put pressure on profit margins in the coming months.