After the GST collection, there is good news for the manufacturing sector. Growth in the country’s manufacturing sector hit a seven-month high in September. The main reason for this was the increase in new orders and production. Activity in the Indian manufacturing sector picked up again in September on strong domestic and export demand. Apart from this, business sentiment reached a four-month high. The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose more than two points to 55.1 in September from 52.8 in August. This represents the strongest improvement in the sector’s position in seven months. In the PMI, a figure above 50 indicates expansion while a figure below 50 indicates contraction.

Manufacturing sector at 7-month high

HSBC’s Head India Economist Pranjal Bhandari said the Indian factory sector ended the quarter in a strong position. The PMI rose to 55.1 in September from 52.8 in August. Strong domestic and foreign demand has boosted sales and production. Employment again grew at the fastest pace since May and manufacturers’ confidence about the coming months also increased. On the price front, the pace of increases in raw material costs and selling prices accelerated, but inflation remained subdued by historical standards. Companies bought more materials to use in the production process and increase stock. Total purchases increased at a faster pace than in August.

A record was made on this front

Bhandari said companies bought more materials and increased stocks to prepare for expected sales. Finished goods inventories recorded the second largest increase in nearly 12 years, marking a clear shift from the trend of holding low inventories. Overall sales growth reached the highest level since February on strong demand in the electronics, food, pharmaceutical and textile sectors. Apart from this, export orders from customers in Brazil, Europe, United Arab Emirates (UAE) and America have also increased at a faster pace compared to August. According to survey participants, employment rose again in September after a slight decline last month. The pace of employment growth remained strong and was the fastest since May.

Continued strength in demand

Indian manufacturers raised their production estimates in September and the overall level of positive sentiment reached a four-month high. This positive trend was due to good prospects of new orders and demand expected to remain strong. The report said finished goods inventories rose for the third straight month and the second fastest pace in 11.5 years. The increase was more than this in July. The HSBC India Manufacturing PMI is prepared based on responses to a questionnaire sent by S&P Global to a group of purchasing managers of nearly 400 manufacturers.