Key Points

According to HSBC, this is the highest level in 14 months and well above the long-term average of 54.1, indicating a strong improvement in business conditions.

One of the key highlights in June was a sharp rise in international orders. Export demand increased at the third-fastest pace since the survey began in 2005, with the United States mentioned frequently by companies as a major source of demand. This strong global interest helped boost overall sales and output.

Production volumes grew at the fastest rate since April 2024, driven mainly by intermediate goods manufacturers. However, consumer and capital goods producers saw slower growth. New orders also rose more quickly, supported by active marketing efforts and growing exports.

The strong increase in demand led to a record rise in employment. After stagnating in May, backlogs of work increased in June, prompting many companies to hire more workers. Most of this hiring was for short-term needs, aimed at handling increased workloads.

While raw material prices such as iron and steel remained high, overall input cost inflation eased to its lowest level since February and was below the historical average.

Despite this, selling prices continued to rise as companies passed on higher costs -- including freight, labour, and materials -- to their customers. Many firms said they were able to raise prices because of strong demand.

Manufacturers also increased their purchases of raw materials, marking the strongest rise in buying activity in 14 months.

This helped boost pre-production inventories, while stocks of finished goods declined as companies drew from existing inventory to meet customer demand. The drop in finished goods inventory was significant by historical standards.

Supply chains continued to improve, with faster delivery times reported -- the best in five months. Despite higher demand for raw materials, vendor performance remained strong.

Pranjul Bhandari, Chief India Economist at HSBC, said, "To keep up with strong demand -- particularly from international markets, as evidenced by the substantial rise in new export orders -- Indian manufacturing firms had to tap deeper into their inventories, causing the stock of finished goods to continue shrinking. Finally, input prices moderated while average selling prices rose as some manufacturers passed on additional cost burdens to clients."

Looking ahead, the outlook for the manufacturing sector remains generally positive. However, businesses expressed some caution due to uncertainties around inflation, rising competition, and changing consumer preferences.

Even so, with strong export growth, easing input costs, and higher employment, the sector appears well-positioned for continued expansion in the coming months.

- ANI