Manufacturing PMI Jumps To 55.1
India’s manufacturing sector staged a strong recovery in September, with factory activity expanding at its fastest pace in seven months.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 55.1 in September from 52.8 in August. A PMI reading above 50 indicates expansion, meaning the sector continued to grow despite a slowdown during the previous three months.
The September reading was the highest since February, although it was slightly below the preliminary estimate of 55.7.
New Orders Rise At Fastest Pace Since February
The biggest driver of the recovery was stronger demand.
New orders increased at their fastest pace since February, supported by rising demand for electronic goods, food products, pharmaceuticals and textiles.
Export demand also improved, with manufacturers reporting stronger orders from customers in Brazil, Europe, the UAE and the US.
The improvement in orders translated into a sharp increase in factory output, with production growth reaching its strongest level since May.
Factories Resume Hiring
The stronger business environment also encouraged manufacturers to increase their workforce.
Factory employment returned to growth in September after declining in August. The pace of job creation was the strongest since May.
The hiring recovery is significant because manufacturing employment had faced pressure during the earlier slowdown. Stronger order books appear to have given companies greater confidence to expand their workforce.
Manufacturers Build Up Inventories
Companies also increased purchases of raw materials and built up stocks in anticipation of stronger future sales.
Finished-goods inventories increased for the third consecutive month, with the pace of accumulation reaching its second-highest level in nearly 12 years.
The increase suggests manufacturers are preparing for sustained demand rather than simply responding to existing orders.
Business Confidence Reaches Four-Month High
Improved demand also lifted business sentiment.
Manufacturers’ confidence about future activity reached a four-month high in September. New enquiries and expectations of continued demand encouraged companies to increase production, hiring and inventory levels.
The improvement indicates that businesses entered the final part of 2026 with greater optimism about their order pipelines.
Input Costs Rise But Remain Moderate
There was some pressure on manufacturers from rising input costs.
Prices of electronic components, pharmaceutical products and steel increased, pushing input-cost inflation higher than in August. Manufacturers also raised selling prices.
However, both input-cost and selling-price inflation remained relatively moderate compared with their long-term averages.
Quarterly Growth Remains Relatively Weak
Despite September’s strong recovery, the overall performance during the July-September quarter remained subdued.
The manufacturing PMI averaged 53.8 during the second quarter of FY27, its lowest quarterly average since the corresponding quarter of 2021.
The sharp September improvement therefore provides a stronger finish to the quarter, but manufacturers will need sustained demand to maintain the momentum in the coming months.
Summary
India’s manufacturing PMI jumped to 55.1 in September from 52.8 in August, marking the sector’s fastest expansion in seven months. Stronger domestic and export demand lifted new orders and output, while factory hiring resumed and business confidence reached a four-month high. Manufacturers also increased inventories in anticipation of continued demand, although input costs rose during the month.
