India's manufacturing sector has witnessed an extraordinary growth in May, painting a positive picture for the industry. The latest data on the Purchasing Managers' Index (PMI) reveals encouraging developments, highlighting the remarkable strength of demand conditions and the subsequent growth in various aspects of the sector.

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While cost pressures remained historically mild, the robust demand strength facilitated a solid and quicker increase in output charges. The seasonally adjusted S&P Global India Manufacturing PMI rose from 57.2 in April to an impressive 58.7 in May, indicating the strongest improvement in the health of the sector since October 2020.

Among the five PMI sub-components, stocks of purchases showcased notable vigour, increasing at an unprecedented pace in May. Monitored companies attributed this growth to improved supply-chain conditions and sustained increases in input purchasing, which ultimately boosted inventory growth. The quantities of purchases saw a sharp and accelerated increase, reaching the strongest expansion rate in over 12 years. This growth can be attributed to ongoing increases in new business and efforts to replenish stocks.

May data also revealed that factory orders increased for the twenty-third consecutive month, reaching the highest level since January 2021. The exceptional growth in international sales played a vital role in boosting total new orders, with Indian manufacturers witnessing the quickest expansion in exports in the past six months. As a result, production volumes were scaled up to meet the growing demand, leading to the sharpest increase in output in 28 months.

India's manufacturing sector is thriving, backed by strong demand, improved supply-chain conditions, and favorable market conditions.

India's manufacturing sector GDP rose 4.5 percent in fourth quarter, while the country overall GDP accelerated to 6.1 percent in fourth quarter and 7.2 percent in FY23. This is much higher than expectations. The Reserve Bank of India expected Q4FY23 real GDP growth at 5.1 percent, while SBI Research predicted a growth rate of 5.5 percent.

(Edited by : Vahishta Unwalla)