India’s manufacturing sector witnessed a sharp rebound in March 2025, with factory activity expanding at its fastest pace in eight months, according to a private survey. The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, surged to 58.1 in March from 56.3 in February, reflecting a strong resurgence in industrial production and factory output. A PMI above 50 indicates expansion, while a reading below 50 signals contraction.

The latest data highlights India’s resilience in the manufacturing sector, with March marking the 45th consecutive month of expansion. This rebound comes after the sector hit a 14-month low in February, driven by buoyant domestic demand, increased customer interest, and successful marketing strategies.

Surge in New Orders and Factory Output

The biggest contributor to the PMI increase was the new orders index, which jumped to 61.5 in March, marking an eight-month high. Companies reported stronger demand conditions, leading to a significant boost in sales growth. This surge in domestic orders played a key role in accelerating overall factory activity.

Despite strong growth in domestic orders, export orders grew at a slower pace, with the rate of growth falling to a three-month low. Sales expansion was seen in Asia, Europe, and West Asia, but weaker global demand slightly impacted international shipments.

Inventory Levels Drop as Companies Ramp Up Production

In response to rising demand, manufacturers tapped into existing inventories, leading to the sharpest decline in finished goods stocks since January 2022. To counter this drop, companies accelerated input purchases at the fastest rate in seven months, indicating a positive outlook for future production.

Workforce Expansion Slows Despite Strong Business Confidence

The expansion in manufacturing activity led companies to increase their workforce, though the rate of hiring was slower in March compared to previous months. This suggests that while firms are confident in sustained demand growth, they are cautiously managing employment costs and productivity levels.

Manufacturing Growth Strengthens India's Economic Outlook

The latest surge in India’s factory activity underscores the country’s strong economic fundamentals. The manufacturing sector’s resilience, coupled with rising consumer demand and sustained business optimism, is expected to support GDP growth in the coming quarters.

With a consistent rise in domestic demand, increasing industrial production, and continued government support for the Make in India initiative, India’s manufacturing sector remains a crucial driver of the nation’s economic growth. As the sector moves forward, businesses remain optimistic about future output and sustained demand expansion in the months ahead.

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