Indian manufacturing growth expanded at its fastest pace in 16 months in July, driven by robust demand, but business confidence fell to a three-year low amid competitive pressures and inflation concerns, a survey showed on Friday.
The HSBC India Manufacturing Purchasing Managers' Index, compiled by S&P Global, rose to 59.1 in July from 58.4 in June, slightly below a preliminary reading of 59.2. The index remained well above the 50-mark separating growth from contraction.
New orders increased at the fastest pace in nearly five years, buoyed by favourable market conditions and marketing efforts. That propelled output growth to a 15-month high.
International demand continued to support overall sales although growth in export orders moderated from June's more than 17-year high.
Despite the strong performance, manufacturers' optimism fell to its lowest level since July 2022. Companies cited mounting competition and inflation concerns as key challenges.
The contrast between present conditions and future outlook was reflected in hiring patterns with employment increasing at the weakest pace since November 2024. A substantial 93% of manufacturers surveyed indicated their current workforce was adequate for production needs.
A recent Reuters poll of independent economists highlighted growing employment concerns. Official government data showed an unemployment rate of 5.6% in June; however, some economists have questioned the accuracy of the measurement methodology.
Inflation intensified in July with input costs rising faster as manufacturers faced higher prices for some raw materials. Companies raised selling prices for the 10th consecutive month as they leveraged strong demand to pass on costs.
The Reserve Bank of India is poised to hold its key policy rate at 5.50% at its meeting next week, but any acceleration in inflation could affect the outlook on monetary policy.
Adding to the uncertainty, U.S. President Donald Trump plans to impose 25% tariffs on Indian goods starting on Friday, a move that could drag on the export sector.
Source Name : Economic Times