India’s manufacturing sector showcased robust performance in April 2025, reaching a 10-month high with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) climbing to 58.2, up marginally from 58.1 in March. This marks the strongest performance since June 2024, reflecting resilient sectoral health, upbeat demand, and improving industrial output amidst global economic shifts.

Export Surge and Global Demand Drive Manufacturing Momentum

A key driver behind this improvement was a surge in export orders, especially from Africa, Asia, Europe, West Asia, and the Americas. This sharp rise reflects India’s growing integration into global supply chains, as geopolitical realignments and evolving U.S. tariff policies encourage multinational companies to diversify their sourcing and production bases. The shift aligns with India’s increasing appeal as a manufacturing hub, especially in the consumer goods segment, where demand remains buoyant both domestically and globally.

Production and Inventory Accelerate; Hiring Rebounds

Production growth remained strong in April, complemented by faster inventory buildup as businesses prepare for anticipated future demand. About 9% of surveyed manufacturers reported workforce expansion — a sign of growing business confidence and sustained economic activity. Employment in the sector is expected to continue expanding as more firms scale operations to meet both domestic and international orders.

Short-Term IIP Gains Contrast FY25 Slowdown

India’s Index of Industrial Production (IIP) — a broad gauge of factory output — rose by 3% in March 2025, aided mainly by strong performance in electricity generation and a modest recovery in manufacturing. However, the mining sector remained weak, pulling down overall momentum.

Despite the March rebound, IIP growth for FY25 slowed to just 4%, its lowest level in four years. The slump is attributed to lingering base effects, high input costs, and global demand uncertainties earlier in the fiscal year. Analysts note that the latest improvement in March and April suggests a gradual return to pre-pandemic industrial growth trajectories.

RBI Steps in with Monetary Support

To boost industrial and economic growth, the Reserve Bank of India (RBI) implemented its second repo rate cut of the year in April, reducing the benchmark interest rate to 6%. The central bank maintained an “accommodative” stance, signaling that further easing is possible if inflation remains in check and growth indicators warrant support.

The move is seen as a pre-emptive step to encourage credit expansion, especially in small and medium enterprises (SMEs) and capital-intensive sectors. Lower borrowing costs are expected to revitalize investments, particularly in manufacturing, infrastructure, and energy.

PMI as a Forward Indicator of Industrial Health

The PMI is widely regarded as a forward-looking indicator that reflects real-time sentiment in the manufacturing economy. A reading above 50 indicates expansion, while below 50 indicates contraction. With the index remaining consistently above the expansion threshold and now hitting its highest level in nearly a year, economic observers interpret this as a signal of continued momentum for India’s industrial revival.

Sector-Wise Insights

• Consumer Goods: Saw the strongest gains, driven by stable domestic consumption and rising exports.

• Intermediate Goods: Showed moderate improvement, reflecting inventory rebuilding and restocking cycles.

• Capital Goods: Still lagging but expected to benefit from ongoing infrastructure investments and government incentives.

Implications for Supply Chain Shifts

India is increasingly seen as a beneficiary of global supply chain realignments, especially in light of rising geopolitical tensions, trade wars, and diversification strategies by multinational firms. The “China+1” strategy has gained momentum, with companies scouting alternatives to Chinese manufacturing dependencies.

India’s PLI (Production Linked Incentive) schemes, along with improvements in logistics infrastructure, and digital manufacturing integration, are aiding this transition. The April PMI data provides empirical support for these trends.

Outlook for FY26

The sustained growth in PMI, coupled with strategic monetary easing and government policy support, suggests that India’s industrial sector could witness a stronger FY26, particularly if global demand stabilizes. Risks remain, especially around:

• Input cost pressures (especially energy and raw materials),

• Supply chain disruptions due to geopolitical issues, and

• Volatility in global financial markets affecting investment sentiment.

Still, the manufacturing sector’s resilience offers a positive foundation for India’s broader economic objectives, especially its ambition to become a global manufacturing hub under the “Make in India” and “Atmanirbhar Bharat” initiatives.

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