India's manufacturing activity in February accelerates expansion due to domestic demand

Investing.com – According to the latest HSBC India Manufacturing PMI released on Monday, driven by strong domestic demand, India’s manufacturing sector accelerated its expansion in February.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index rose from 55.4 in January to 56.9 in February, reaching a four-month high. Readings above 50 indicate expansion in the sector.

Manufacturers reported that strong demand, marketing efforts, and rising customer orders supported a renewed increase in new business. The growth rate was the fastest since October last year and remained at a high level.

Output grew at the fastest pace in four months, surpassing its long-term average. Panel members attributed the increase to efficiency improvements, healthy potential demand, new order growth, and technological investments.

New export orders expanded at the slowest pace in 17 months, with the growth rate approaching its long-term average. Companies reported increased external sales from Asia, Europe, the Middle East, and the United States.

As total new orders continued to expand, manufacturers purchased additional materials to support production and increase inventories. Procurement levels rose at the fastest rate in three months. Inventory before production increased sharply, well above long-term trends.

Input cost inflation in February remained moderate, unchanged from January. Companies reported rising labor, material, and transportation costs pushing up expenses. Output price inflation slightly increased, exceeding its long-term average, as firms sought to protect profit margins.

Factory employment expanded at the fastest rate in four months. Manufacturers’ unfinished business volume rose to a seven-month high, supporting additional hiring.

Pranjul Bhandari, Chief Economist at HSBC India, said the data reflects an acceleration in manufacturing activity in February. “Supported by stronger domestic orders, output expanded at a faster pace for the second consecutive month,” Bhandari said. “The growth of new export orders continued the slowdown trend that began in mid-2025, which somewhat limited job creation in the manufacturing sector.”

The outlook for production over the next year remains positive, with 16% of firms forecasting growth and less than 1% expecting a decline. Marketing efforts and favorable demand conditions underpin this outlook.

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