India’s Manufacturing PMI Falls to 57.6 in May, Hitting a Three-Month Low – Factors Affecting Growth Explained

India’s Manufacturing Activity Declines in May

India’s manufacturing activity saw a dip from 58.2 in April to 57.6 in May, marking the weakest improvement in operating conditions since February, as per the seasonally adjusted HSBC India Manufacturing Purchasing Managers Index (PMI).

The headline figure, although above the neutral mark of 50.0 and the long-run average of 54.1, indicated a slowdown in the rates of increase in new orders and output, which retreated to three-month lows in May.

Despite this, the manufacturing industry in India experienced a robust improvement in business conditions for the month, driven by ongoing growth in new orders and output. However, factors like competition, inflation, and the India-Pakistan conflict posed challenges to overall growth.

Growth in New Orders and Job Creation

Companies reported continued growth in new orders supporting output, although at a slower pace over the past three months. Both domestic and international demand contributed to the increase, with new export orders rising significantly.

Moreover, there was a notable increase in hiring, with the rate of job creation reaching a new series record. However, rising input costs and selling prices posed challenges for manufacturers as they tried to maintain profit margins.

Inflation and Operating Expenses

Manufacturing companies faced higher input costs in May, attributed to materials like aluminium, cement, iron, leather, rubber, and sand. Inflation reached its highest level since November 2024, driven by increased expenses on freight and labor.

To cope with rising operating costs, firms raised selling prices to offset the impact on profit margins, supported by strong demand in the market.