Key Highlights:
- Manufacturing PMI Jumps to 58.1 in March
- After falling to a 14-month low of 56.3 in February, India’s HSBC Manufacturing PMI rebounded to 58.1, the highest in eight months.
- A PMI above 50 indicates expansion, signaling strong growth momentum.
- Surge Driven by New Orders
- The New Orders Index, the PMI’s largest sub-component, expanded at its fastest pace since July 2024.
- Companies cited strong demand, better marketing, and improved customer interest as key growth drivers.
- Production ramped up to meet year-end targets.
Potential Economic Risks
- US Tariff Threats & Global Trade Tensions
- US President Donald Trump’s new tariffs (expected April 2) may disrupt global trade.
- India’s exports could be moderately impacted, with subdued international orders already reflected in the PMI.
- A 20% average tariff hike could shrink India’s GDP by 0.4%, according to Capital Economics.
- The RBI may need to act if confidence in business and consumption declines.
- Impact on RBI’s Monetary Policy
- RBI is set to meet on April 7-9, with a repo rate cut of 25bps (to 6%) widely expected.
- RBI already cut rates in February and introduced liquidity measures to support economic growth.
- Economic Growth Projections
- GDP growth for Q3 FY24-25 improved to 6.2% YoY (from 5.6%), but urban consumption slowdown remains a concern.
- Barclays estimates Q4 GDP growth at 6.7%, averaging 6.2% for FY24-25, slightly below RBI’s 6.5% forecast.
- RBI’s updates on growth and inflation forecasts for FY25 and FY26 will be closely monitored.
Inflationary Pressures & Business Confidence
- Input Costs Rising:
- Copper, electronics, leather, LPG, and rubber saw price hikes, pushing PMI’s input cost index to a three-month high.
- Weaker Output Price Growth:
- Despite rising costs, there was a softer increase in prices charged for Indian goods.
- Business Confidence Dips Slightly:
- The Future Output Index dropped from 64.9 in February to 64.4 in March, signaling potential risks to growth expectations.
While India’s manufacturing sector shows resilience, external risks like US tariffs, global trade tensions, and rising inflationary pressures could impact future growth. The RBI’s upcoming policy decisions and macroeconomic indicators will be crucial in determining the next phase of economic momentum.
Mint
