Manufacturing PMI rises to 8-month high in March driven by new orders

India's Manufacturing Purchasing Managers’ Index (PMI) rose to 58.1 in March 2025, up from 56.3 in February, according to data released by HSBC and compiled by S&P Global on Wednesday. The rise was driven by stronger new orders growth, as the New Orders Index reached its highest level in eight months, supported by increased customer interest, favourable demand conditions, and successful marketing initiatives.

Pranjul Bhandari, Chief India Economist at HSBC, said, "India registered a 58.1 manufacturing PMI in March, up substantially from 56.3 during the previous month. Although international orders slightly slowed, overall demand momentum remained robust, and the new orders index recorded an eight-month high of 61.5. Strong demand prompted firms to tap into their inventories, causing the fastest drop in finished goods stocks in over three years. Business expectations remained fairly optimistic, with around 30 per cent of survey participants foreseeing greater output volumes in the year ahead, compared to less than 2 per cent that anticipate a contraction."

In response to stronger new orders, manufacturers scaled up production at a pace above historical averages. To meet rising demand, firms tapped into their inventories, leading to the fastest drop in finished goods stocks since January 2022. Companies also increased input purchases at the quickest rate in seven months to counter stock depletion.

Although international sales growth slowed slightly, demand from Asia, Europe, and the Middle East remained strong. Additionally, business expectations remained optimistic, with around 30 per cent of firms anticipating higher output in the coming year.

The manufacturing PMI in February dropped to a 14-month low of 56.3 driven by weaker growth in output and sales, along with a slowdown in input purchasing.

What is Manufacturing PMI?

Manufacturing PMI data is an economic indicator that measures the activity level in the manufacturing sector. It is based on a survey of purchasing managers across manufacturing industries and provides insights into business conditions, including production, new orders, employment, supplier delivery times, and inventory levels.

This data is closely watched as an early indicator of economic health, helping businesses, policymakers, and investors gauge trends in the manufacturing industry and overall economy.

Rate cuts expected in RBI MPC

The RBI's monetary policy committee (MPC) is scheduled to hold its first meeting of fiscal 2025-26 on April 7-9. According to a Business Standard poll, the MPC is expected to cut benchmark interest rate by 25 basis points in its policy review meeting to push growth.

Higher and stubborn inflation had prompted the RBI to tighten the monetary policy, and it raised the policy rate by 250 bps between May 2022 and February 2023, reaching 6.5 per cent.

In February 2025, the repo rate was cut by 25 bps to 6.25 per cent.