India’s factory output grows at quickest pace in 17 years

Delhi: India’s manufacturing output grew at its quickest pace in over 17 years, led by robust domestic demands even though international sales softened due to US tariffs, an industry survey conducted by S&P Global showed on Monday.

Purchasing Managers’ Index (PMI) for manufacturing rose to 59.3 in August from 59.1 recorded in the previous month. This survey-based data indicated the fastest improvement in operating conditions of the Indian manufacturing sector in 17-and-a-half years.

“Indian manufacturing growth gained further momentum in August, with ongoing improvements in demand continuing to underpin robust increases in factory orders and production,” S&P Global said in its monthly report, which is based on a survey conducted among nearly 400 manufacturing firms spread across the country.

Production volumes expanded at its quickest pace in five years. The strongest sales and output performances were reported in the intermediate goods category, followed by capital and then consumer goods.

However, concern over the US tariffs dragged international sales growth to five-month low.

“The increase of US tariff on Indian goods to 50% might have contributed to the slight easing in new export orders growth, as American buyers refrain from placing orders in the midst of tariff uncertainty," said Pranjul Bhandari, Chief India Economist at HSBC.

“Overall orders growth, on the other hand, held up much better, suggesting that domestic orders remained robust, helping to cushion against tariff-related drag on the economy. Manufacturers’ continued optimism for future output is a positive sign,” said Bhandari.

There was an increase in employment for the 18th month in a row. However, the pace of growth in job creation in August was weakest since November 2024.

Greater output requirements and efforts to rebuild stocks prompted manufacturers to purchase additional raw materials and semi-finished items midway through the second fiscal quarter.

“One factor that supported these positive spending trends was confidence among manufacturers that output would increase over the course of the coming 12 months,” S&P Global said. The overall level of positive sentiment recovered from July's three-year low.

Capacity pressures among goods producers remained subdued in August, as highlighted by a marginal increase in outstanding business volumes. Firms generally noted an absence of pressure on supply chains, with average lead times shortening to a greater degree than in July, the report noted.