India's Manufacturing Growth Hits 16-Month High, but Business Confidence Falters
India’s manufacturing sector activity reached a 16-month high in July, with the HSBC PMI rising to 59.1, driven by strong new orders and output. Despite the robust current performance, the outlook is mixed. The survey revealed that business confidence has slumped to a three-year low, weighed down by concerns over inflation and intensifying competition. Furthermore, the pace of job creation slowed to its least extent in eight months, signaling caution among manufacturers about future prospects.
Unpacked:
Business confidence has dropped due to rising concerns about inflation and intensifying competition, which could squeeze profit margins and make future growth less certain, even though current demand and output remain robust.
The PMI is an indicator of the economic health of the manufacturing sector, with values above 50 signaling expansion. A value of 59.1 indicates strong growth in manufacturing activity, reflecting increased orders and output.
Recent policies include production-linked incentives (PLIs), tariffs, and domestic content requirements, designed to boost manufacturing output, encourage local production, and attract both domestic and foreign investment.
Manufacturing currently contributes about 17.2% to India's real GDP, below the government’s target of 25%. Efforts are ongoing to increase this share through policy measures and investment incentives.