India's manufacturing sector activity hits 13-month high in December on rise in new orders, strong demand

India's manufacturing sector activity rose to a 13-month high in December, supported by healthy inflows of new business and strong demand conditions, according to a monthly survey.

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) stood at 57.8 in December, up from 55.7 in November, as business conditions improved to the greatest extent in over two years.

The December PMI data pointed to an improvement in overall operating conditions for the 18th straight month. In PMI parlance, a print above 50 means expansion while a score below 50 indicates contraction.

"Following a promising start to 2022, the Indian manufacturing industry maintained a strong performance as time progressed, wrapping the year with the best expansion in production seen since November 2021," Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said.

Hiring activity was stretched to December, while more inputs were acquired as firms sought to supplement production and add to their inventories.

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Demand resilience boosted sales growth in December. Panellists continued to obtain healthy inflows of new business, and stepped up production to the greatest extent seen since November 2021.

Factors that supported sales growth include, advertising, product diversification and favourable economic conditions, as per the survey.

"Less challenging supply-chain conditions also supported the upturn. Delivery times were reportedly stable, which enabled firms to secure critical materials and boost their input stocks," Lima said.

On the exports front, new orders rose at the slowest pace in five months as several companies reportedly struggled to secure new work from key export markets, the report said.

On the year-ahead outlook for production, companies were optimistic. Advertising and demand buoyancy were cited as the key opportunities to growth prospects.

"While some may question the resilience of the Indian manufacturing industry in 2023 amid a deteriorating outlook for the global economy, manufacturers were strongly confident in their ability to lift production from present levels," Lima said.

On the inflation front, cost pressures remained relatively muted in December, with the overall rate of inflation little-changed from November and the second-slowest since September 2020.

The S&P Global India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.

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