India's March factory growth hits 16-year high, boosts hiring

India manufacturing sector: India's manufacturing sector witnessed robust expansion in March, reaching its highest level in 16 years, driven by accelerating demand. A survey revealed that hiring also surged at the strongest rate in six months, indicating a positive outlook for the economy.

The HSBC final India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, climbed to 59.1 last month from February's 56.9, marking the highest reading since February 2008. Although slightly lower than the preliminary estimate of 59.2, this result signifies continuous growth in the sector for the 33rd consecutive month, the longest streak since July 2013.

Ines Lam, an economist at HSBC, commented, "The HSBC final India Manufacturing PMI indicates that production growth continued to be strong, supported by both domestic and external demand."

Both output and new orders sub-indexes reached their highest levels since October 2020, with exports expanding at the fastest pace in nearly two years. This uptick in demand led to increased hiring in March, with employment generation at its strongest since September, following a period of stagnation in the previous two months.

Lam added, "Buoyed by robust demand and improving profit margins, manufacturers have an optimistic outlook about future business conditions."

While the outlook for the upcoming year remains optimistic, the sub-index for future expectations eased for a second consecutive month to 63.3, primarily due to concerns about inflation. Input costs rose at the fastest pace in five months, although not all were passed on to clients. The prices charged sub-index reached its lowest level in over a year as firms made efforts to retain customers by refraining from hiking fees.

Persistent concerns about inflation have led the Reserve Bank of India to resist interest rate cuts. According to a Reuters poll, no one expects the RBI to change its stance this month, with the first rate cut not anticipated until the September quarter.

(With Reuters inputs.)