India’s manufacturing sector grew strongly in July reaching its highest level in 16 months thanks to a rise in production and new orders. This was shown in a private survey released on Friday. However despite the good growth companies are feeling less confident about the future because of worries about rising competition and inflation. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) prepared by S&P Global rose to 59.1 in July up from 58.4 in June. In the earlier months the PMI was: 57.6 in May 58.2 in April 58.1 in March 56.3 in February 57.7 in January According to the survey companies bought more raw materials in July almost the same as in June. However hiring slowed down hitting its lowest point since November 2024. Most importantly business confidence how hopeful companies feel about the future dropped to the lowest level in the last three years. What is the PMI Index? PMI stands for Purchasing Managers’ Index. It is an economic measure that shows whether the manufacturing sector is growing or slowing down. A score above 50 means the sector is growing. A score below 50 means the sector is shrinking. Growth driven by strong orders and higher output According to Pranjul Bhandari Chief India Economist at HSBC this growth is mainly due to more new orders and higher production. In fact the overall sales in July grew at the fastest pace in the last 5 years. This shows that manufacturing companies in India are feeling confident and are planning to increase their production in the coming 12 months. According to HSBC’s latest survey India’s manufacturing sector grew at its fastest pace since March 2024. The month of July saw strong growth in production and sales driven by higher demand both in India and abroad. Total sales saw a big jump thanks to more new deals and increased domestic orders. Exports also grew slightly adding to the momentum. Rising costs still a challenge The report also pointed out some concerns. The cost of raw materials has gone up sharply especially items like: Aluminium Leather Rubber Steel Because of this both production costs and final product prices have increased. Many companies had to raise prices due to high demand. However so far this hasn’t reduced customer demand. The survey shows that most manufacturing companies expect even stronger growth in the coming months. However the overall confidence is a bit lower compared to the last three years. How is the PMI Data Collected? The HSBC India Manufacturing PMI is prepared by S&P Global. It is based on the responses of about 400 manufacturing companies. These companies are asked questions related to: New orders Production levels Staffing (hiring) Pricing Inventory (stock levels)