India’s manufacturing sector accelerated in August, recording its strongest expansion in nearly 18 years as factory activity continued to gain momentum. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 59.3 in August from 59.1 in July, signalling the sharpest improvement in operating conditions since early 2008.
The survey, compiled by S&P Global, showed that stronger domestic demand, rising new orders and higher production volumes underpinned this performance.
The pace of production growth was the quickest seen in close to five years. Manufacturers cited better synchronisation between supply and demand as a key driver, with many pointing to successful advertising campaigns as well. The most robust sales and output expansion came from intermediate goods producers, followed by capital goods and consumer goods firms.
Domestic demand offsets weaker export growth
Incoming new orders continued to rise strongly, broadly in line with July’s growth, which was the steepest in nearly five years. However, export orders showed signs of moderation, with August recording the weakest rise in overseas demand in five months. Even so, Indian manufacturers secured fresh business from markets in Asia, Europe, the Middle East and the US.
HSBC’s Chief India Economist Pranjul Bhandari noted: “India’s manufacturing PMI hit another new high in August, driven by a rapid expansion in production. The increase of US tariff on Indian goods to 50 per cent might have contributed to the slight easing in new export orders growth, as American buyers refrain from placing orders in the midst of tariff uncertainty. Overall orders growth, on the other hand, held up much better, suggesting that domestic orders remained robust, helping to cushion against tariff-related drag on the economy. Manufacturers’ continued optimism for future output is a positive sign.”
Purchasing, hiring and inventories on the rise
To meet growing demand, firms stepped up their buying activity, with input purchases expanding at the fastest pace in 16 months. Employment also rose for the eighteenth consecutive month, albeit at the slowest rate since November 2024. Manufacturers continued to expand inventories, with input stocks rising sharply and finished goods inventories increasing for the first time in nine months.
Confidence in future output strengthened compared with July, rebounding from a three-year low. This optimism was reflected in higher recruitment and purchasing activity across the sector.
Price pressures remain moderate
Input costs rose further in August, particularly for items such as bearings, leather, minerals, steel and small electronic parts. However, overall inflation was moderate and remained below the historical trend. In contrast, output charges rose more steeply, with demand strength enabling companies to pass on higher costs to customers. Selling price inflation was the sharpest in three months.
Meanwhile, supply chain conditions improved, with firms reporting shorter delivery times compared to July. Capacity pressures stayed subdued, as evidenced by only a marginal rise in backlogs of work.
The HSBC India Manufacturing PMI is based on responses from around 400 purchasing managers across various sectors and company sizes. Data collection, which began in March 2005, is weighted to reflect each sector’s contribution to GDP, providing a reliable gauge of industry-wide trends.
