India’s manufacturing sector experienced a slight slowdown in February, with the Purchasing Managers’ Index (PMI) declining to 56.3 from 57.7 in January, according to data released by S&P Global on Monday. This dip was driven by a moderate decline in the pace of new orders and production. However, despite the slowdown, the PMI remains firmly in expansionary territory, signaling continued strength and resilience in the sector.
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India’s manufacturing sector witnessed a slight deceleration in February 2025, with the Purchasing Managers’ Index (PMI) dropping to 56.3 from 57.7 in January, according to data released by S&P Global on Monday. This marks a 14-month low for the index, indicating a modest loss of momentum in new orders and production. However, despite the decline, the manufacturing PMI remains firmly in expansionary territory, reflecting continued growth in the sector.
Resilience Amidst a Slowdown
Pranjul Bhandari, Chief India Economist at HSBC, noted that although the February PMI reading was the lowest since December 2023, it still signified a robust improvement in the health of the manufacturing industry. “India recorded a 56.3 manufacturing PMI in February, down slightly from 57.7 during the prior month, but still firmly within expansionary territory. Despite slowing to the weakest since December 2023, rates of expansion in output and sales remained elevated in the context of the survey’s 20-year history,” she said.
The survey highlighted that both domestic and international demand remained favourable, prompting manufacturers to increase purchasing activity and expand their workforce. However, the pace of expansion eased to a 14-month low. Demand buoyancy also contributed to keeping charge inflation at an elevated level, even as cost pressures softened.
S&P Global pointed out that February marked the forty-fourth consecutive month of rising new business intakes, with survey participants attributing this to strong client demand and strategic pricing by firms. While the overall pace of growth in new business slowed to its weakest level since December 2023, it remained above the long-term average.
Manufacturers also experienced strong growth in new export orders, though slightly softer than January’s near 14-year high. This surge in international demand encouraged manufacturers to expand their workforce further in February. The rate of job creation was the second-highest in the history of the survey, second only to January’s record level. “One in ten firms signalled greater recruitment activity, while only one per cent reported job losses,” the survey stated.
Input Costs and Inflation Trends
The manufacturing sector continued to face rising input costs, particularly in materials such as bamboo, leather, marketing services, rubber, and telecom. However, the overall rate of inflation eased for the third consecutive month, reaching its lowest level in a year. Meanwhile, charge inflation—reflecting the prices charged by manufacturers—remained above both its long-run average and the input cost inflation rate.
The resilience of charge inflation suggests that manufacturers are able to pass on some cost increases to consumers, despite the softer input price pressures. This, coupled with sustained demand, reflects underlying strength in the sector.
Despite the February slowdown, manufacturing firms remain highly optimistic about future growth prospects. Many businesses anticipate that strong client demand will continue to support output expansion in the coming year.
“Unfinished business rose further in February, as demand growth continued to outpace increases in production. The rate of backlog accumulation was slight but nevertheless reached its highest since January 2024,” S&P Global reported. This suggests that firms are still operating near full capacity, indicating sustained demand that could drive future expansion.
While India’s manufacturing sector saw a mild deceleration in February, the overall outlook remains positive. The sector continues to benefit from strong domestic and international demand, increased workforce expansion, and strategic pricing initiatives. Though input costs are rising, easing inflationary pressures and continued demand are likely to support growth in the months ahead.
With business sentiment remaining strong and firms prepared to scale up operations, India’s manufacturing industry is well-positioned for continued expansion in 2025, despite short-term fluctuations in PMI readings.
