Factory output improves in Jan: Manufacturing PMI

The year 2025 began on a positive note for manufacturing, with the HSBC final India Manufacturing Purchasing Managers’ Index rising to a six-month high of 57.7 in January from December’s 12-month low of 56.4. It was slightly lower than an early estimate of 58 though.

Reuters attributed the rise to resilient demand and strong output, encouraging firms to hire at a record rate. “That could bring a sigh of relief for Asia’s third-largest economy, which has seen a slowdown in growth over the past few quarters as consumption remains weak,” the news agency said.

The HSBC final India Manufacturing Purchasing Managers' Index, compiled by S&P Global, has been above the 50-mark separating expansion from contraction since July 2021. “India's final manufacturing PMI marked a six-month high in January. Domestic and export demand were both strong, supporting new orders growth,” Reuters quoted Pranjul Bhandari, chief India economist at HSBC, as saying.

New orders, an indicator of overall demand, grew at the sharpest rate since July partly driven by strong export orders, which expanded at the quickest pace in nearly 14 years. The sub-index measuring output hit a three-month high.

That boosted confidence for the coming 12 months, with firms expanding their workforces at the strongest pace since at least March 2005, when the survey began.

Easing inflation pressure also helped. Input prices increased at the weakest pace in nearly a year enabling firms to raise selling prices at a slower pace last month.

This is welcome news given headline inflation has stayed above the Reserve Bank of India's medium-term target of 4 per cent for most of the past year.

The RBI will cut its key repo rate by 25 basis points to 6.25 per cent after its February 5-7 meeting, according to a majority of economists in a Reuters poll.

India slashed personal tax rates in its annual budget on Saturday, as the world's fifth-largest economy focuses on boosting domestic demand amid uncertainty over the global economic outlook due to potential new tariff barriers.