MUMBAI, 2nd Nov: India’s manufacturing sector is still expanding, but the momentum has softened. The India manufacturing PMI slipped to 54.7 in October from 55.1 in September, even as export orders surged to a six-month high and input cost pressures eased. The message is clear: demand remains resilient, but manufacturers are navigating a more uncertain business environment.

India manufacturing PMI: Growth continues despite moderation

The HSBC India Manufacturing Purchasing Managers’ Index (PMI) declined to 54.7 in October, compared with 55.1 in September.

A PMI reading above 50 indicates expansion, while a reading below 50 signals contraction. October’s figure therefore confirms that India’s manufacturing sector continued to grow, even though the pace moderated slightly.

The decline was not a dramatic reversal. Manufacturing activity remained comfortably in expansionary territory, supported by stronger international demand, rising production and continued growth in new business.

Still, the numbers reveal a sector dealing with two contrasting realities. Orders are coming in, but business confidence is weakening. Manufacturers are expanding production, yet they are also building inventories to prepare for potential supply disruptions.

Here are five major trends shaping India’s manufacturing sector in October.

1. Export orders hit a six-month high

International demand emerged as one of the strongest drivers of manufacturing growth.

New export orders increased at their fastest pace in six months, providing an important boost to Indian manufacturers. The rise in overseas demand helped support production even as the overall pace of manufacturing expansion moderated.

Manufacturers reported higher sales across several international markets, including the US, UK, Canada, Bangladesh, Indonesia, Nepal, Oman, Saudi Arabia, Sri Lanka and the UAE.

That is a broad geographical spread. Indian manufacturers are finding demand across both developed and emerging markets.

Domestic demand also remained supportive. New business continued to increase sharply, although growth eased slightly from September’s seven-month high.

Manufacturers attributed the rise in new orders to favourable demand conditions, fresh client wins and successful marketing campaigns.

The combination of domestic business and stronger export demand helped keep the sector moving forward.

2. Production rises, but momentum cools

Manufacturers continued to increase production at a sharp pace in October.

Higher sales and new product launches supported output growth. However, production expanded more slowly than in September.

The slowdown was mainly linked to intermediate goods producers, whose output growth moderated.

Despite this, intermediate goods producers continued to lead overall manufacturing growth.

The distinction matters. India’s manufacturing sector is not contracting, but different segments are experiencing different growth patterns.

For businesses, the immediate priority remains meeting demand while managing production requirements.

The October data suggest that manufacturers are still expanding operations, although the pace is no longer accelerating as strongly as it did in the previous month.

3. Input cost inflation cools to its lowest level since February

Cost pressures offered manufacturers some relief.

Input cost inflation eased across all three broad manufacturing segments tracked by the survey. Although some raw materials and energy costs increased, the overall rate of input cost inflation fell to its lowest level since February.

That is a welcome development for manufacturers dealing with rising production requirements.

Lower input cost inflation can provide companies with greater flexibility when managing margins. However, it does not mean production costs have fallen outright. Manufacturers continued to report higher prices for certain materials and energy.

Selling prices also increased, as companies attempted to protect their profit margins.

But the rise remained marginal and was the weakest in nearly four years.

In other words, manufacturers continued to pass on some costs, but the pace of selling-price increases remained subdued.

For India’s broader economy, this combination of easing input inflation and modest selling-price growth is an important trend to watch.

4. Hiring continues as inventories reach new highs

India’s manufacturing sector added jobs for the second consecutive month in October.

Higher production requirements and increased workloads supported employment growth. However, hiring remained modest and slowed compared with September.

The employment picture was also uneven. Capital goods producers reduced their workforce, while other manufacturing segments reported increases in employment.

Outstanding business volumes increased for the seventh consecutive month, although the pace of growth remained marginal.

Manufacturers also continued to build inventories.

Stocks of finished goods rose at the fastest pace ever recorded by the survey. Companies deliberately accumulated buffers to meet rising demand and protect against potential supply shortages.

Input inventories also increased at a faster pace, with accumulation reaching an eight-month high.

Input purchasing rose for the 64th consecutive month, although the pace of growth was the weakest during this period.

The message is straightforward: manufacturers are preparing for demand while trying to reduce the risk of disruptions.

5. Business confidence weakens despite expansion

Here is the less comfortable part of the October data.

Manufacturers became less optimistic about the business outlook, even as demand and production continued to grow.

Business confidence declined from September and remained below its long-term average.

Nearly 18% of manufacturers expected output to increase over the next 12 months. The remaining firms were neutral about the outlook.

Companies expecting growth pointed to fresh client enquiries and rising demand for industrial automation and technology solutions.

That suggests manufacturers still see opportunities in technology-driven production and new business relationships.

However, the broader confidence reading indicates that businesses are not rushing to make aggressive growth assumptions.

Strong current demand is one thing. Confidence in the next 12 months is another.

What HSBC said about India’s manufacturing outlook

Pranjul Bhandari, Chief India Economist at HSBC, said India’s manufacturing PMI moderated to 54.7 in October from 55.1 in September.

She noted that the index remained firmly in expansionary territory and above its long-term average.

Bhandari said strong international demand pushed new export orders to a six-month high, supporting a robust increase in output.

She also highlighted the rise in input inventories, which reached an eight-month high as manufacturers built precautionary buffers.

According to Bhandari, companies were preparing for potential shortages and higher production requirements amid global uncertainty.

She added that although some material and energy costs increased, overall input and output price pressures eased slightly from the previous month.

The bottom line

India’s manufacturing sector remains on a growth path, but October’s data point to a more complicated operating environment.

Export demand is strengthening. Input cost inflation is cooling. Hiring continues, and manufacturers are preparing inventories to meet demand.

At the same time, production growth has moderated and business confidence has weakened.

The India manufacturing PMI at 54.7 is not a warning of contraction. It is a reminder that expansion alone does not tell the whole story.

Manufacturers are still growing, but they are becoming more cautious about what comes next.