India's manufacturing activity slows to 2-year low in December as demand momentum eases: PMI

Growth in India’s manufacturing sector slowed to its weakest pace in two years in December as softer domestic and export demand weighed on new orders and production, a monthly survey said on Friday.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI) fell to 55.0 in December from 56.6 in November, the lowest reading since December 2023.

However, it stayed above the long-run average and the 50-mark that separates expansion from contraction, according to data released by S&P Global.

Manufacturers reported that new orders and output continued to expand but at slower rates due to competitive pressures and weaker sales of certain products.

“Even with growth momentum easing, India’s manufacturing industry wrapped up 2025 in good shape,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

"The sharp rise in new business intakes should keep companies busy as we head into the final fiscal quarter, and the lack of major inflationary pressures could continue to support demand," she added.

New export orders rose at the slowest pace in 14 months, with firms citing softer demand from overseas markets despite some improvement in orders from Asia, Europe and the Middle East.

"We have seen a steady spell of softer growth in new export orders. In fact, the share of companies signalling higher international sales in December was about half of the average for 2025. The survey's anecdotal evidence has also pointed to a narrower range of export destinations, with goods mainly heading to Asia, Europe and the Middle East," Lima said.

Employment growth cooled further as factory hiring increased at the slowest pace in the current 22-month period of job creation.

Purchasing activity rose at the least pronounced rate in two years as companies limited input purchases amid softer sales momentum.

Input cost inflation remained muted, rising at one of the lowest rates seen in 2025, while output price inflation eased to a nine-month low.

Going ahead, Indian goods producers foresee an increase in output during 2026 relative to present levels, but the overall sentiment level has faded to its lowest in close to three-and-a-half years.

While advertising, positive demand trends and new product releases were seen as tailwinds to the outlook, some firms were concerned about competitive pressures and market uncertainty.

"With Indian manufacturers facing less intense cost pressures than elsewhere, many will be hoping that competitive pricing can help bring in new business from other regions in the new year," Lima said.