UPSC CURRENT AFFAIRS – 03rd April 2025

Home UPSC Current Affairs Manufacturing PMI climbs to eight month high of 58.1 in March

Manufacturing PMI climbs to eight month high of 58.1 in March

Why in News?

India’s Manufacturing PMI rose to 58.1 in March 2025, an eight-month high, driven by strong domestic demand, increased new orders, and robust production growth.

Introduction

India’s Manufacturing Purchasing Managers’ Index (PMI), a key indicator of industrial activity, rose to an eight-month high of 58.1 in March 2025, according to a report by S&P Global.
This marks a significant increase from 56.3 in February 2025.
The index has now remained above the expansion threshold of 50 for 45 consecutive months, highlighting sustained growth in the sector.

Key Highlights of the PMI Report

Strong Growth in New Orders
- The increase in PMI was primarily attributed to higher new orders, which reached an eight-month high of 61.5.
- Domestic demand remained robust, even though international orders experienced a slight slowdown.
- Firms responded to strong demand by utilizing existing inventories, leading to the sharpest decline in finished goods stocks in over three years.
Sales and Production Expansion
- Manufacturing sales expanded at a robust pace, driven by positive customer interest, strong market conditions, and effective marketing strategies.
- Production volumes also increased toward the end of the financial year 2024-25, indicating a positive outlook for the sector.
- Export orders continued to grow, but the growth rate was the slowest in three months.
Price Trends and Cost Pressures
- Input prices recorded a three-month high but remained below their long-term average, suggesting manageable cost pressures.
- Despite rising input costs, the increase in prices charged for goods remained moderate, helping to sustain demand.
Business Sentiment and Future Outlook
- Business confidence remained optimistic, with 30% of firms expecting higher output in the next 12 months, compared to less than 2% anticipating a contraction.
- HSBC noted that pending projects and stable customer relations contributed to positive expectations for future output levels.

Purchasing Managers’ Index (PMI)

The Purchasing Managers’ Index (PMI) is a widely used economic indicator that measures the performance of the manufacturing and services sectors in an economy.
It is based on a survey of purchasing managers in businesses and provides insights into economic trends such as growth, contraction, and business sentiment.

How is PMI Measured?

PMI is calculated based on five key indicators:

- New Orders – Measures the level of demand for goods and services.
- Production Output – Reflects the level of manufacturing activity.
- Employment Levels – Indicates hiring trends in the industry.
- Supplier Deliveries – Assesses supply chain efficiency.
- Stock of Purchases – Tracks inventory levels of raw materials.

PMI Scale and Interpretation

- PMI above 50 → Indicates economic expansion and industry growth.
- PMI below 50 → Suggests contraction in business activity.
- PMI at 50 → Signals no change in business conditions.

Types of PMI

- Manufacturing PMI – Measures the performance of the manufacturing sector.
- Services PMI – Assesses the health of the services industry.
- Composite PMI – A combined measure of manufacturing and services PMI.

Importance of PMI

- Leading Economic Indicator – PMI provides early signals of economic trends before official GDP data.
- Business and Investment Decisions – Helps companies plan production, hiring, and investments.
- Central Bank Policy – Used by policymakers to assess inflationary pressures and adjust monetary policies accordingly.
- Stock Market Reactions – PMI influences investor sentiment and stock market movements.

Conclusion

The latest PMI data signals continued strength in India’s manufacturing sector, supported by strong domestic demand, steady production growth, and favorable business sentiment. Despite global uncertainties and a slight slowdown in export orders, the manufacturing industry remains resilient, contributing to the overall economic momentum.