India’s March Factory Growth Soars, Hiring Surges

India’s manufacturing sector saw strong growth in March, reaching its highest pace in 16 years, thanks to increased demand. A survey indicates that hiring also picked up, marking the strongest rate in six months.

This positive data is likely to boost support for Prime Minister Narendra Modi’s government, which has been prioritizing manufacturing to bolster the economy, already one of the fastest-growing among its peers.

According to the HSBC final India Manufacturing Purchasing Managers’ Index, compiled by S&P Global, the index rose to 59.1 last month from February’s 56.9. Though slightly lower than the preliminary estimate of 59.2, it’s still the highest since February 2008.

This marks the 33rd consecutive month with a reading above the 50-mark, indicating growth—a streak not seen since July 2013.

HSBC economist Ines Lam notes, “The HSBC final India Manufacturing PMI indicates that production growth continued to be strong, supported by both domestic and external demand.” Both output and new orders reached their highest levels since October 2020, with exports expanding at the fastest pace in nearly two years.

This growth prompted increased hiring in March, with employment generation at its strongest since September, following two months of stagnation.

Lam adds, “Buoyed by robust demand and improving profit margins, manufacturers have an optimistic outlook about future business conditions.”

While the outlook for the upcoming year remains positive, the sub-index for this indicator eased for a second month to 63.3 due to concerns about inflation. Input costs rose at the fastest pace in five months, but not all costs were passed on to clients, resulting in the prices charged sub-index reaching its lowest level in over a year as firms sought to retain customers.

The Reserve Bank of India’s concerns about inflation have led it to resist interest rate cuts, with a Reuters poll showing no expectations for a pivot this month, and the first cut not anticipated until the September quarter.