India's manufacturing activity expanded at its fastest pace in more than 17 years in August as production accelerated amid strong demand, which added to inflationary pressures, a survey showed on Monday.
Asia's third-largest economy grew at a stronger-than-expected 7.8% in the April-June quarter, well above the Reuters median forecast of 6.7%, government data showed on Friday.
Manufacturing output rose 7.7% year-on-year, compared with 4.8% in the previous quarter.
But the Trump administration's steep 50% tariff on U.S. imports of Indian like garments, gems and jewellery, footwear, sporting goods, furniture, and chemicals threatens to dampen growth in the coming quarters.
Manufacturing accounts for around 17% of India's gross domestic product.
The HSBC India Manufacturing Purchasing Managers' Index , compiled by S&P Global, rose to 59.3 in August - the highest since February 2008 - from 59.1 in July. Although, the reading was slightly lower than a preliminary estimate of 59.8.
PMI readings above 50.0 indicate growth in activity while those below point to a contraction.
"India's manufacturing PMI hit another new high in August, driven by a rapid expansion in production. The increase of U.S. tariff on Indian goods to 50% might have contributed to the slight easing in new export orders growth, as American buyers refrain from placing orders in the midst of tariff uncertainty," said Pranjul Bhandari, chief India economist at HSBC.
"Overall order growth, on the other hand, held up much better, suggesting that domestic orders remained robust, helping to cushion against tariff-related drag on the economy."
The output sub-index increased at the strongest pace since late 2020, with companies citing better alignment between supply and demand.
New orders continued to grow robustly in August, maintaining the brisk pace seen in July, which was the fastest in nearly five years. Firms attributed the sustained expansion to demand strength and successful advertising campaigns.
However, new export orders grew at a softer pace, marking the weakest expansion in five months, though still remaining strong by historical standards. Manufacturers reported securing new work from clients in Asia, Europe, the Middle East and the United States.
Firms increased their workforce for the 18th consecutive month, though the pace of job creation slowed to its weakest since November 2024. Despite the moderation, hiring remained strong compared to long-term trends.
Inflationary pressures increased with both input and output prices rising to a three-month high. Input costs continued to rise, albeit mildly, with manufacturers reporting higher prices for bearings, leather, minerals, steel and electronic components.
In contrast, selling prices rose markedly, as companies leveraged robust demand conditions to pass on costs to customers.
Firms also boosted their purchasing activity at the fastest pace in 16 months, significantly above the long-run average, as they sought to rebuild inventory levels.
Business confidence among manufacturers improved in August, recovering from July's three-year low supported by demand even as the U.S. tariffs cloud the growth outlook.
Asia's third-largest economy grew at a stronger-than-expected 7.8% in the April-June quarter, well above the Reuters median forecast of 6.7%, government data showed on Friday.
Manufacturing output rose 7.7% year-on-year, compared with 4.8% in the previous quarter.
But the Trump administration's steep 50% tariff on U.S. imports of Indian like garments, gems and jewellery, footwear, sporting goods, furniture, and chemicals threatens to dampen growth in the coming quarters.
Manufacturing accounts for around 17% of India's gross domestic product.
The HSBC India Manufacturing Purchasing Managers' Index , compiled by S&P Global, rose to 59.3 in August - the highest since February 2008 - from 59.1 in July. Although, the reading was slightly lower than a preliminary estimate of 59.8.
PMI readings above 50.0 indicate growth in activity while those below point to a contraction.
"India's manufacturing PMI hit another new high in August, driven by a rapid expansion in production. The increase of U.S. tariff on Indian goods to 50% might have contributed to the slight easing in new export orders growth, as American buyers refrain from placing orders in the midst of tariff uncertainty," said Pranjul Bhandari, chief India economist at HSBC.
"Overall order growth, on the other hand, held up much better, suggesting that domestic orders remained robust, helping to cushion against tariff-related drag on the economy."
The output sub-index increased at the strongest pace since late 2020, with companies citing better alignment between supply and demand.
New orders continued to grow robustly in August, maintaining the brisk pace seen in July, which was the fastest in nearly five years. Firms attributed the sustained expansion to demand strength and successful advertising campaigns.
However, new export orders grew at a softer pace, marking the weakest expansion in five months, though still remaining strong by historical standards. Manufacturers reported securing new work from clients in Asia, Europe, the Middle East and the United States.
Firms increased their workforce for the 18th consecutive month, though the pace of job creation slowed to its weakest since November 2024. Despite the moderation, hiring remained strong compared to long-term trends.
Inflationary pressures increased with both input and output prices rising to a three-month high. Input costs continued to rise, albeit mildly, with manufacturers reporting higher prices for bearings, leather, minerals, steel and electronic components.
In contrast, selling prices rose markedly, as companies leveraged robust demand conditions to pass on costs to customers.
Firms also boosted their purchasing activity at the fastest pace in 16 months, significantly above the long-run average, as they sought to rebuild inventory levels.
Business confidence among manufacturers improved in August, recovering from July's three-year low supported by demand even as the U.S. tariffs cloud the growth outlook.
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