India’s private sector continued to expand in September, though momentum eased compared with the multi-year highs recorded in August. The HSBC Flash India Composite Output Index, a key measure that tracks the combined performance of manufacturing and services, fell to 61.9 from 63.2 in August. While the index retreated, it still pointed to one of the sharpest rates of expansion seen in more than two years.
Despite the slowdown, analysts noted that the current level indicates a resilient private sector performance, underpinned by strong demand and relatively favourable operating conditions. Business confidence also strengthened, reaching its highest level in seven months at the close of the second fiscal quarter.
Manufacturing Leads, Services Lag Slightly
The pace of growth in factory output continued to outstrip that of services, although both sectors reported softer increases. The HSBC Flash India Manufacturing PMI, which tracks business conditions using metrics such as new orders, output, and employment, slipped to 58.5 in September from 59.3 a month earlier. This still represented robust growth well above the neutral 50.0 threshold and its long-term average of 54.2.
Services activity also cooled, with the HSBC Flash India Services Business Activity Index at 61.6 compared to 62.9 in August. Although expansion slowed, the sector maintained healthy growth, reflecting ongoing demand in domestic markets.
New Orders and International Sales Trends
Indian companies reported another substantial increase in new business volumes in September, though the rate of expansion was softer than in August. Competitive pressures were cited by some firms as a reason for slower inflows, even as overall demand conditions remained broadly favourable. Export trends diverged, with manufacturers recording stronger growth while service providers saw one of the weakest increases since March 2025. As a result, overall new export orders grew at their slowest pace in six months.
Employment and Capacity Pressures
Private sector employment continued to rise, but the pace of job creation moderated across both manufacturing and services. The proportion of firms adding staff stood at roughly 3 per cent in manufacturing and 5 per cent in services, reflecting limited pressure on capacity. Survey data suggested that most companies had adequate workforce levels to meet current demand, as backlogs of work increased only marginally.
Input Costs and Pricing Pressures
Cost dynamics varied across sectors. Input price inflation cooled in services, while manufacturers faced renewed cost pressures linked to higher wage bills and rising prices of raw materials such as cotton, electronic components, oil, steel, and wood. Despite this, overall cost increases across the private sector were less marked than in August.
Pricing behaviour also differed. Manufacturers pushed through the steepest rise in factory gate prices in over 12 years, while service providers eased back on price hikes. This combination led to a slowdown in aggregate output price inflation.
Looking ahead, private sector firms expressed strong optimism about future output, with sentiment climbing to its highest since February 2025. Expectations were driven by confidence in demand strength, efficiency improvements, competitive pricing strategies, and planned capacity expansions. Some firms also pointed to potential benefits from the recent GST rate cut, which they expect could support growth in the coming quarters.
Overall, while September’s flash PMI readings suggest a slight cooling of momentum, India’s private sector remains firmly in expansion mode, with confidence pointing to continued strength into the next quarter.
