India Manufacturing Activity Hits Highest Level Since February

India's manufacturing activity rebounded sharply in September, with the HSBC India Manufacturing Purchasing Managers' Index rising to 55.1, the highest level since February. This growth was driven by a surge in new orders for textiles, pharmaceuticals, food, and electronics, alongside accelerated export demand from Brazil, Europe, the UAE, and the United States.

HSBC reported that the increase in activity led to the strongest expansion in output since May and a resumption of hiring following a decline in August. To prepare for anticipated sales, companies significantly increased finished-goods inventories. Pranjul Bhandari, chief India economist at HSBC, noted that finished-goods inventories recorded their second-largest increase in nearly 12 years, signaling a shift away from leaner stock levels.

While business confidence reached a four-month high, input cost inflation rose due to higher prices for electronic components, pharmaceutical items, and steel. In response to inflation exceeding its 4% target for three consecutive months, the Reserve Bank of India is expected to raise interest rates by 50 basis points to 5.75% this year.