India Manufacturing Growth Slumps to Five-Year Low in August Amid Softening Demand

India's manufacturing sector experienced its slowest pace of expansion in five years during August, driven by soft demand and challenging market conditions, according to survey data released by S&P Global.

The HSBC India Manufacturing Purchasing Managers' Index (PMI) fell to 52.8 in August, down from 53.5 in July. This figure was slightly lower than the preliminary estimate of 52.9. Despite the decline, the reading remains above the 50.0 threshold, which separates growth from contraction.

The slowdown follows a strong April-June quarter, during which Asia's third-largest economy grew by 7.8% year-on-year, exceeding Reuters poll expectations of 7.1%. That expansion was largely supported by an investment boom and manufacturing sector growth. However, current-quarter growth is projected to moderate to 6.6%.

According to the survey, new orders grew at their slowest pace since August 2021, with companies citing weak demand for specific products and difficult market environments. While export orders continued to rise, the pace of international demand growth eased compared to July. Output also continued to expand, matching the five-year low trajectory of overall growth.

Reflecting caution among manufacturers, factory headcounts fell for the first time in 30 months, although the reduction was described as marginal.

On the pricing front, cost pressures eased as input price inflation touched a six-month low. Consequently, firms limited increases in their selling prices, causing output charge inflation to slow to its weakest level in 45 months and fall below its long-run trend.

Despite the broader slowdown, business confidence edged up slightly to reach its highest level since May, though overall sentiment remained subdued relative to historical standards.

"The drop in the HSBC India Manufacturing PMI to a five-year low highlights a critical cooling phase in domestic demand and order pipelines. While the broader economy has shown resilience, the contraction in factory headcounts—even if marginal—signals that businesses are exercising caution amid easing input costs. For entrepreneurs and MSMEs in the manufacturing ecosystem, this points to a challenging near-term operating environment that requires strict inventory and cost management until demand recovers sustainably." — Dr. Shishir Gupta, Founder & CEO, StartupLanes