India's Manufacturing Booms in January on Rising Export Orders

India's manufacturing industry experienced robust growth in January this year, driven by a significant increase in new export orders and anticipated restocking efforts globally, as per the HSBC flash PMI report published on Friday. According to an examination of 100 activity indicators, the report indicates that the growth momentum has strengthened in the quarter concluding in December, with 65 percent of the indicators experiencing positive growth in the December quarter, up from 55 percent in the prior quarter.

The statement indicated that the services PMI in January was slightly below the previous month.

"The divergence between manufacturing and services could be driven by tariff fears. We find that new export orders rose sharply for manufacturers, in fact, more sharply than the rise in domestic orders or the rise in service orders. This, we think, can be attributed to rapid restocking around the world, before new likely tariffs kick in. And manufacturing output responded to these new orders by raising output rapidly," the report states.

Cost pressure trends also showed variations. Although input costs dropped to a ten-month low for manufacturers, service provider prices increased -- the quickest pace since August 2023. As a result, the fees set by the service providers increased. Nonetheless, their margins kept declining because the increase in prices charged lagged behind the rise in costs. Conversely, the report indicated that manufacturers' margins have increased.