India’s Manufacturing and Services Sectors Show Strong Growth in 2024
New Delhi, India – India’s manufacturing sector has demonstrated resilience and growth in the first four months of FY25, according to the finance ministry’s monthly economic review for July. The Purchasing Managers’ Index (PMI) for Manufacturing stood at 58.1 in July 2024, significantly above the long-term average and among the highest in recent years. This growth is driven by strong demand and increased production volumes.
However, the sector faces challenges, particularly rising input costs. In July 2024, input cost inflation reached its highest level in nearly two years, driven by increased prices for materials like coal, leather, packaging materials, paper, rubber, and steel. Consequently, manufacturers raised output prices to an 11-year high.
Despite these pressures, the Index of Industrial Production (IIP) reported a year-on-year growth of 5.2% in Q1 FY25, up from 4.7% the previous year. The index of eight core industries also recorded a year-on-year increase of 5.7% in Q1 FY25. The Reserve Bank of India’s (RBI) survey in August 2024 indicated an expansion in capacity utilisation within the manufacturing sector, rising to 76.8% in Q4 FY24 from 74.7% in the previous quarter.
Housing sales in Q1 FY25 saw a year-on-year growth of 41.8% across eight major cities, reflecting positive consumer sentiment toward real estate investments. This increase in housing demand has positively impacted the manufacturing sector.
The services sector also performed well, with the PMI Services Index at 60.3 in July 2024. The sector’s growth is driven by international sales, new orders, and rising export orders, despite rising wage and material costs. The tourism sector, a key driver of the services industry, showed impressive growth with 40.7 lakh foreign tourist arrivals during January-May 2024, up from 37.3 lakh the previous year. Foreign exchange earnings from tourism during this period totalled Rs 1.1 lakh crore, marking a 22.5% increase year-on-year.
The World Travel and Tourism Council’s report for 2023 highlighted that India’s travel and tourism sector has fully recovered to pre-pandemic levels, contributing Rs 19.3 lakh crore to the nation’s GDP in 2023, a nearly 10% increase over pre-pandemic levels. Domestic tourism spending in 2023 surged to Rs 14.6 lakh crore, 15% higher than pre-pandemic levels. India is projected to become the fourth-largest domestic travel market by 2030, further boosting the tourism and hospitality sectors.
Doubts Revealed
Manufacturing sector -: This is the part of the economy that makes products in factories, like cars, clothes, and toys.
FY25 -: FY25 stands for Fiscal Year 2025, which is a one-year period used for accounting and budgeting. It usually starts on April 1, 2024, and ends on March 31, 2025.
PMI -: PMI stands for Purchasing Managers’ Index. It is a number that shows how well the manufacturing or services sector is doing. A number above 50 means growth.
Input costs -: These are the costs of the materials and resources needed to make products, like raw materials, labor, and energy.
Year-on-year growth -: This means comparing the growth of something, like a sector, from one year to the same period in the next year.
Services sector -: This part of the economy provides services rather than goods, like banking, education, and healthcare.
Tourism sector -: This includes businesses and activities related to travel and visiting places, like hotels, travel agencies, and tourist attractions.
Foreign tourist arrivals -: This means the number of people from other countries who visit India.
Foreign exchange earnings -: This is the money India earns from foreign tourists spending money in the country.
Pre-pandemic levels -: This means the situation before the COVID-19 pandemic started, which was in early 2020.