Manufacturing PMI fell from 57.5 in September to 55.5 in October.
The Indian manufacturing sector is critical in shaping the economy and providing employment to millions of people. The strong performance of sectors like automotive, engineering, chemical, pharmaceutical and consumer durables is why India’s manufacturing sector has been a pillar of economic growth.
Several years ago, the machine tools industry was the only backbone of the Indian manufacturing industry. Fast forward to today, technology has helped bring digital transformation and encouraged innovation, which has helped make this sector strong and competitive in the market! However, during the current times, this sector is facing several headwinds.
In this article, we’ll discuss the industry’s present situation and the future possibilities it holds.
The Indian manufacturing sector hit an eight-month low in October 2023. According to CNBC TV18, the S&P Global India Purchasing Managers Index (PMI) fell from 57.5 in September 2023 to 55.5 in October 2023, which is the slowest pace of growth since February 2023. The manufacturing PMI stood at 58.6 in August 2023.
However, according to the S&P Global report, October’s PMI data meant that the manufacturing activity in India showed improvement for 28 consecutive months. This is because the October 2023 data for PMI was above the 50-level mark. A PMI reading above 50 levels means expansion, whereas a reading below 50 depicts contraction.
Manufacturing PMI fell in October 2023 to reach 55.5
Reason for Slowdown in Manufacturing PMI
According to a report by Mint, due to competitive pressures and weak demand, the growth rate fell to an eight-month low. Also, job creation has been the slowest since April 2023. Only 4% of companies are additionally hiring, whereas 95% are not hiring freshers.
Apart from this, due to inflation and demand concerns, business confidence fell to a five-month low. Slow economic growth and consistent inflationary pressures, fiscal deficits, growing tensions in the Middle East and weakness in global trade due to geopolitical concerns in Ukraine have been the key reasons for this slowdown.
Pollyanna De Lima, the Economic Associate Director of S&P Global Market Intelligence, said, “Consumer goods were behind most of the slowdown, recording considerably softer increases in sales, production, exports, input inventories and buying levels”.
India’s Manufacturing Sector
According to an IBEF report, the Indian economy has the potential to export goods worth 1 trillion USD by 2030, and the country is on the path to becoming a global manufacturing hub!
Constituting 17% of the country’s GDP and employing more than 27.3 million workers, the Indian manufacturing sector plays a vital role in the economy.
Due to various incentives and policies being rolled out, the Indian government believes that by 2025, 25% of the economy’s output will be contributed by the Indian manufacturing sector.
Apart from this, manufacturing exports during 2023 experienced a growth of 6.03%, clocking the highest-ever exports worth 447.46 billion USD. This was above the FY22 levels, where export value stood at 422 billion USD. By 2030, the share of the Indian middle-class in global consumption is expected to reach 17%, the second highest.
The Indian manufacturing sector faces some headwinds, but the future looks bright. According to the data by Statista, the Indian manufacturing sector is expected to reach a value of 244.50 billion USD by 2023. This is then expected to grow at a CAGR of 8.36% during 2023-2028.
Apart from this, the output from the Indian manufacturing sector is expected to be worth 1,313 billion USD. This is expected to grow at a CAGR of 4.36% during 2023-2028.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.