India's manufacturing sector showed a modest improvement in January as demand conditions firmed, but the uptick failed to restore broad confidence among producers or to trigger a sizeable acceleration in employment.
The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, increased to 55.4 in January from December's two-year low of 55.0. That result missed the earlier preliminary reading of 56.8. The index has consistently stayed above the 50.0 threshold that separates expansion from contraction since July 2021.
Output strengthened compared with December, when activity had slowed to a 38-month low. New orders, which track demand, gained some momentum after the previous month's slowdown, suggesting a pickup in underlying domestic demand.
Export demand, by contrast, remained weak. Export orders only improved marginally from December, implying the recent rise in overall activity was driven largely by domestic customers. Manufacturers said they received orders from clients across Asia, Australia, Canada, Europe, and the Middle East.
Employment moves were cautious. Hiring increased to a three-month high, yet overall job growth stayed modest as firms calibrated staffing to meet higher operating requirements without pursuing aggressive recruitment.
Sentiment among manufacturers weakened noticeably. Business confidence fell to its lowest level in three-and-a-half years, with only 15% of surveyed companies expecting output to rise over the coming year and the majority forecasting no change.
On the cost side, input inflation picked up moderately and at the fastest pace in four months. Firms pointed to higher prices for chemicals, copper, iron, steel, and transportation as contributors to the rise in input costs. Despite firmer demand, output price inflation eased to its lowest level in nearly two years, indicating limited pricing power for manufacturers.
Sectoral note - The results have implications across manufacturing supply chains and logistics networks. Stronger domestic orders may support freight volumes and raw-material flows, while weak export demand and muted output price gains could constrain revenue headroom for producers and affect related commodities and transport providers.