Manufacturing sector conditions in India continued to strengthen in October, buoyed by GST relief, productivity gains and tech investment, the HSBC India Manufacturing PMI, compiled by S&P Global, revealed on Monday.

A faster increase in new orders boosted growth of output and buying levels, and the latter drove a near-record expansion in input inventories. Meanwhile, external sales rose at the slowest pace in ten months. Elsewhere, there was a modest and softer increase in input costs, but the rate of charge inflation matched September’s near 12-year high.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index – a single-figure indicator of sector performance–was up from 57.7 in September to 59.2 in October, indicating a quicker improvement in the health of the sector.

New orders increased further at the start of the third fiscal quarter, with companies attributing growth to advertising, buoyant demand and the GST reform. Moreover, the pace of expansion was sharp and stronger than that recorded in September, the survey said.

Similarly, growth of output quickened from the previous month. Matching that seen in August, the rate of expansion was the joint-best in five years.

“Robust end-demand fuelled expansions in output, new orders, and job creation. Meanwhile, input prices moderated in October while average selling prices increased as some manufacturers passed on additional cost burdens to end-consumers. Looking ahead, future business sentiment is strong due to positive expectations around GST reform and healthy demand,” said Pranjul Bhandari, Chief India Economist at HSBC

October data showed that the pick-up in sales growth mainly stemmed from the domestic market, as new export orders increased at a softer rate. The latest improvement in international demand for Indian goods was marked, though the least pronounced in the calendar year-to-date.

Manufacturers continued to purchase additional raw materials and semi-finished items in October, reportedly to supplement production and add to their inventories. Notably, buying levels expanded at the fastest pace since May 2023.