India’s manufacturing sector expanded at its slowest pace in nearly five years during July, as domestic demand weakened and hiring slowed, according to the latest S&P Global HSBC India Manufacturing Purchasing Managers’ Index (PMI).
The headline PMI fell to 53.5 in July, down from 54.2 in June, marking its lowest level since August 2021. The reading came in below the earlier estimate of 53.9. Despite the decline, the index remained above the 50 threshold, indicating continued growth in factory activity.
July’s data revealed a clear divergence between domestic and overseas demand. Export orders improved after a sharp slowdown in June, rising at their fastest pace since April, driven by stronger demand from countries including Canada, Egypt, Indonesia, Kenya, Nepal, South Africa, Thailand, and the United Arab Emirates. In contrast, new orders increased at the second-slowest rate in more than four years, with manufacturers attributing the slowdown to weaker client interest and challenging market conditions.
Factory output continued to grow in July, with the pace of expansion little changed from June, though it remained near the weaker levels seen since mid-2022. Consumer goods producers faced softer conditions, while intermediate and capital goods manufacturers recorded better performance.
Employment increased for the 29th consecutive month, but hiring grew at the slowest pace in that period, weakening for a third straight month. The trend suggests manufacturers became more cautious as order growth lost momentum. Companies also reduced the pace of input buying during July, though they continued to build inventories as supply conditions improved. Stocks of raw materials and finished goods both increased.
Supplier delivery times shortened at one of the fastest rates recorded by the survey, indicating that supply chain delays continued to ease. However, renewed tensions in the Middle East have raised doubts about the durability of these improvements. Pranjul Bhandari, chief India economist at HSBC, noted, “The suppliers’ delivery times index rose in July, an encouraging sign that supply chain delays are continuing to unwind. However, renewed tensions in the Middle East have raised fresh doubts about how durable these improvements will be.”
Input cost inflation slowed to a five-month low in July, with price increases for several raw materials becoming less severe, though transportation costs remained high. Selling prices rose only modestly, as softer demand and strong competition limited manufacturers’ ability to raise prices more sharply. Bhandari added, “Meanwhile, output and new export orders strengthened, pointing to resilient demand, particularly from overseas markets. Input costs eased while output charges increased as firms sought to protect margins.”
Business confidence improved from June’s recent low, with manufacturers expecting demand, infrastructure projects, and new client enquiries to support activity. The survey covered approximately 400 manufacturing companies across India, measuring output, orders, employment, costs, and business expectations.
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