Growth, despite global constraints

  • Articles
  • May 08,24
India’s manufacturing activity (with Purchasing Managers' Index at 58.8) witnessed a dip in April 2024 from the 16-year high in March 2024 (PMI at 59.1).
Growth, despite global constraints

India’s manufacturing activity (with Purchasing Managers' Index at 58.8) witnessed a dip in April 2024 from the 16-year high in March 2024 (PMI at 59.1). Inspite of a fall, the HSBC final India Manufacturing Purchasing Managers' Index (PMI) number, signalled the second-best improvement in the health of the manufacturing sector for 3.5 years. The PMI was comfortably above the neutral mark of 50.0 and its long-run average of 53.9.

Supported by buoyant demand, companies have experienced a sharp upturn in new business intakes in the last two months. Total new orders rose sharply, with the pace of expansion being the second strongest since the start of 2021. Despite higher costs of raw materials and labour, inflation remained below the historical average and firms were able to pass these increases onto consumers with demand remaining resilient (resulting in improvement in margins).

A positive outlook for the year ahead has prompted manufacturers to expand their staffing levels. According to TeamLease EdTech, fresher hiring in the manufacturing sector is seeing an uptick currently, in the first half of calendar 2024, because of an increase in capital investments, mergers and acquisitions activities in the automobile, electronics, and textile domains and an increased focus on manufacturing. 

With a sustained improvement in demand from all regions, Asia, Australia, Europe and the Americas, export orders increased markedly. India's engineering goods exports edged up to $ 109 billion in 2023-24 (compared to $ 107 billion in 2022-23) despite a slowdown in some of the major global markets amid geo-political tensions. As per EEPC India officials, FY24 closed on a strong note, with engineering exports rising 10.66 per cent year-on-year to $11.28 billion in March 2024 against $10.19 billion in the same month last year.

The major reasons for this good show, according to Arun Kumar Garodia, Chairman, EEPC India, were China Plus One policy (which is driving all countries to look at India for sourcing), substantial rise in exports to new markets (for example, Russia), and signing of free trade agreements (FTAs) with UAE and Australia. India has gained from the crisis between Russia and Ukraine, as India's engineering exports to Russia has doubled to $ 1.22 billion till February during the 2023-24 fiscal (compared to $ 616.68 million in the previous fiscal). Similarly, India has seen 60 per cent jump in exports to Saudi Arabia. Newly signed FTA with the European Free Trade Association (which include countries like Switzerland, Iceland, Norway and Liechtenstein) and about-to-be-concluded FTAs with Gulf Cooperation Council (GCC) and Oman will further help India to boost exports and expand its reach.

With India maintaining its high growth rate in the last few years, multinational firms are very bullish on the country. This was quite evident when Smart Manufacturing & Enterprises (SME) spoke to global leaders during Hannover Messe 2024, one of the world’s largest industrial trade fairs hosted in Hannover (Germany) from April 22-26. After the new government assumes office in June, one would expect the economic activity to gain momentum.

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