Summary:
India’s manufacturing PMI fell to 52.8 in August 2026, marking a five-year low and the third consecutive monthly decline. Slower output, new orders and export growth pointed to weaker manufacturing momentum. Employment also declined for the first time in two-and-a-half years. However, easing input cost pressures allowed manufacturers to moderate price increases. The slowdown contrasts with India’s strong 7.8% GDP growth in Q1 FY27, keeping the outlook mixed.
India’s manufacturing sector expanded at its weakest pace in five years in August, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) falling to 52.8 from 53.5 in July. The reading marked the third consecutive monthly decline and was also below the long-run average of 54.2. Despite the slowdown, a PMI reading above 50 continued to indicate expansion in operating conditions.
Output and New Orders Slow
The moderation was driven by slower growth in output and new orders, both of which recorded their weakest expansion since August 2021. New business continued to rise at a marked pace, but the rate of growth was the slowest in five years as manufacturers cited challenging market conditions and subdued demand for some products.
Demand trends weakened across two of the three industrial groups covered by the survey, with consumer goods being the exception. Production volumes continued to increase strongly, although the pace eased to its lowest level since August 2021 due to softer demand and more limited increases in new orders.
Export Growth Moderates
Manufacturers continued to secure new business from overseas markets during August, with export orders increasing from countries including Australia, Germany, mainland China, Spain, Thailand and the US. However, the pace of growth in international orders slowed compared with July, adding to signs of moderation in overall demand.
Employment Declines After Two-and-a-Half Years
The weaker sales environment also affected hiring and purchasing decisions. Manufacturing employment declined for the first time in two-and-a-half years, although the contraction was fractional. Companies that reduced staff largely attributed the decline to lower business requirements.
Input purchases increased for the 62nd consecutive month, but at the weakest pace during this period. While some manufacturers continued to replenish inventories, others reduced purchases in response to weaker demand. Finished-goods inventories increased for the second consecutive month as lower-than-expected sales resulted in a moderate accumulation of stocks.
Input Cost Pressures Ease
Cost pressures moderated during August, with input-price inflation easing to a six-month low. Manufacturers continued to report higher costs for inputs such as steel and transport, but the overall increase was slower.
Lower cost pressures allowed companies to moderate selling-price increases. Fewer than 7% of survey participants raised their charges during the month, while output-price inflation eased to its weakest level in 45 months and remained below its long-run trend.
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Business Confidence Improves Despite Slowdown
Despite weaker operating conditions, manufacturers became more optimistic about the year ahead. Around 16% of surveyed companies expected output to increase over the next 12 months, while the remaining respondents anticipated no change. Business confidence rose to its highest level since May, although it remained subdued by historical standards.
PMI Slowdown Contrasts With Strong Official Data
The private-sector PMI slowdown contrasts with official economic data. India’s economy grew 7.8% in Q1FY27, with growth remaining broad-based despite disruptions to global trade and energy markets. Manufacturing growth accelerated to 9.2% in April-June from 7.9% in the preceding quarter and 8.3% a year earlier, while services remained the fastest-growing segment.
