India’s January factory activity growth hits six-month high, driven by robust demand and output

India’s factory activity growth picked up momentum at the fastest pace in six months during January 2025, driven by resilient domestic and export demand, along with strong output. According to the HSBC India Manufacturing Purchasing Managers’ Index (PMI) compiled by S&P Global, the index rose to 57.7 in January, improving from December’s 56.4. This marked a significant recovery after recent slowdowns, remaining comfortably above the 50-mark threshold separating expansion from contraction since July 2021.

Key Drivers of Growth:
New orders, an essential gauge of overall demand, increased at their fastest pace since July, supported by strong export growth. Export orders grew at the quickest rate in nearly 14 years, boosting manufacturing output to a three-month high.

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“India’s final manufacturing PMI marked a six-month high in January. Domestic and export demand were both strong, supporting new orders growth,” said Pranjul Bhandari, chief India economist at HSBC.

Hiring Reaches Record Levels:
The robust growth encouraged firms to expand their workforces at a record pace, the strongest hiring rate since March 2005, when the survey began. This signals manufacturers’ optimism regarding sustained future demand.

Easing Cost Pressures:
Input costs rose at the slowest pace in nearly a year, allowing manufacturers to moderate price hikes on their products. This is a positive development amid India’s persistent inflation challenges, as headline inflation has remained above the Reserve Bank of India’s medium-term target of 4% for most of the previous year.

Outlook and Policy Response:
The improved manufacturing performance coincides with expectations of a potential 25 basis point rate cut by the Reserve Bank of India (RBI) at its upcoming February 5-7 meeting, as per a Reuters poll of economists. The recent tax cuts in India’s 2025-26 Union Budget aim to further stimulate domestic consumption, helping the country navigate global uncertainties, including trade tensions and potential tariff barriers.

India’s January factory activity growth offers optimism for sustained recovery, even as policymakers remain vigilant about inflation and global risks affecting Asia’s third-largest economy.