In May 2023, Indias factory output experienced its fastest expansion since October 2020, driven by robust demand and increased production.The robust performance of the economy, coupled with increased demand and production, has not only been a significant boost but has also resulted in firms ramping up their hiring activities at the swiftest pace in the last six months, as reported by S&P Globals Manufacturing Purchasing Managers Index (PMI).Unlike countries in Asia such as China, Japan, and South Korea, which have faced persistent challenges in their manufacturing sectors, Indias manufacturing industry has emerged as a key driver of the countrys economy in recent quarters.image source: twitterIn May, the Manufacturing PMI in India reached a level of 58.7, the highest in over 2.5 years, surpassing Aprils reading of 57.2. This marks the 23rd consecutive month that the PMI has remained above the 50-point threshold, which indicates a clear distinction between growth and contraction in the manufacturing sector.According to Pollyanna De Lima, Associate Director of Economics at S&P Global, the increase in domestic orders not only enhances the stability of the economy but also contributes to the development of international partnerships and elevates Indias standing in the global market.Additionally, Pollyanna De Lima noted that these factors collectively resulted in the creation of more job opportunities in the month of May.The survey findings revealed that new orders experienced the most rapid expansion since January 2021, with foreign demand also growing at the fastest rate in six months. As a result of increased orders, the quantity of purchases accelerated at the highest rate in over 12 years.This surge in demand prompted firms to hire employees at the strongest rate since November 2022, while optimism regarding future business activity reached its highest level in five months.However, this increase in demand also led to firms charging higher prices to their clients, resulting in output price inflation reaching a one-year high, despite input costs rising at a slower pace.According to Pollyanna De Lima, the rise in inflation driven by increased demand is not necessarily negative. However, it has the potential to diminish purchasing power, pose challenges for the economy, and potentially pave the way for further interest rate hikes.
