India’s Manufacturing PMI Hits Three-Month Low in May Amid Price Pressures and Global Uncertainty

India’s Manufacturing Growth Slows in May

India’s manufacturing activity declined to a three-month low of 57.6 in May, compared to 58.2 in April, as price pressures and the India-Pakistan conflict impacted growth in new orders, according to a private sector survey released on June 2.

Impact of Price Pressures and Global Uncertainty

The decline in May marks the first decrease in the HSBC India Manufacturing Purchasing Managers’ Index (PMI) since the imposition of reciprocal tariffs by US President Donald Trump, which raised import costs to their highest level in nearly a century. The ongoing conflict between India and Pakistan also weighed on demand, as reported by surveyed companies.

Key Findings of the Survey

Despite the slowdown, the PMI value remained higher than the long-run average of 54.1. The survey highlighted:

• New export orders rose at one of the strongest rates recorded in three years, driven by favourable demand from Asia, Europe, the Middle East, and the US.
• Cost pressures persisted, with companies citing increased prices for aluminium, cement, iron, leather, rubber, and sand.
• The rate of input inflation rose to its highest level since November 2024, but manufacturers were able to mitigate the impact on profit margins by raising output prices.

Future Outlook

Indian manufacturers expressed strong confidence in a rise in output over the next 12 months, citing opportunities in advertising and new customer enquiries. The services activity, for which data will be released on June 4, is expected to perform better, with preliminary data indicating the index value rose to its highest level in 14 months.

Broader Economic Context

The Indian economy performed well in the January-March quarter, with growth rising to a four-quarter high of 7.4%, compared to 6.4% in the previous quarter. This pushed India’s GDP growth to 6.5%, in line with the Reserve Bank of India’s (RBI) target. The central bank has set a growth target of 6.5% for the current fiscal year.

Conclusion and Future Developments

As the Indian economy continues to navigate global uncertainty and price pressures, the manufacturing sector is expected to play a crucial role in driving growth. With a strong outlook for the services sector and a focus on mitigating cost pressures, India’s economic growth is likely to remain robust in the coming months.