Indian manufacturing sector conditions continue to strengthen in Oct

The manufacturing sector in India moved ahead with marked momentum in October. According to the latest data from the HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, the headline figure rose to 59.2, up from 57.7 in September.Business Standard+2mint+2

Key Drivers of the Strength

• Domestic demand surge: The rise in new orders accelerated, supported mainly by the domestic market rather than exports.mint+1

• GST reforms & tax relief: The impact of recently rationalised goods and services tax (GST) measures helped ease cost pressures and boost business confidence.The Tribune+1

• Technology and productivity investment: Firms are increasingly investing in technology and greater productivity, which supported output growth and inventory builds.mint

• Inventory build-up: Input purchases and inventories of raw materials and semi-finished items rose sharply – one of the highest levels since May 2023.Business Standard+1

• Job creation continues: Employment rose for the twentieth month in a row in October, albeit at a moderate rate.Business Standard+1

Important Caveats

• Exports slow down: Although overall conditions improved, export orders rose at their weakest pace in ten months, indicating global demand remains a headwind.Business Standard+1

• Input cost vs selling price: Input cost inflation softened to its weakest in eight months, but output/charge inflation remained high — companies passed on higher freight, labour and other costs to customers.Business Standard

• Capacity pressures still mild: Backlogs increased marginally; delivery times improved (shortened) as suppliers managed timely dispatches.The Tribune

Why this matters

This uptick in manufacturing signals a deeper recovery in India’s industrial base. A PMI well above 50 means expansion, and 59.2 is a strong reading by historical standards — pointing not just to growth, but to momentum. With domestic demand driving activity, the Indian manufacturing sector appears less vulnerable to external shocks (though exports remain a concern). Coupled with GST relief and technology investment, companies are positioning for sustained growth — which also bodes well for employment, investment and the broader economy.

What to watch going forward

• Will export demand pick up again? With global uncertainties and tariffs, the weakness in external orders could dampen growth ahead.

• Can cost pressures be kept in check? Passing on costs helps margins, but may face demand resistance if inflation bites consumers.

• Will capacity utilisation rise? A larger expansion will require firms to deploy newly built capacity, hire more workers, and invest in equipment.

• How deep will inventory strategies go? Rising inventories may support production now, but if demand wanes, stock-builds could become a drag.

Conclusion

The October results for India’s manufacturing sector paint a positive picture: faster growth in new orders, stronger output, inventory accumulation, and sustained job creation. The rise of the PMI to 59.2 underscores that the recovery is not only under way but strengthening. However, reliance on domestic demand, slower export growth, and the fine balance between cost inflation and output pricing mean vigilance is needed. For businesses, policymakers and investors, the message is clear: India’s factory floor is humming — and staying tuned to external demand, cost dynamics and capacity utilisation will be key to maintaining the rhythm.