India flash PMI climbs to 56.5 in September on stronger manufacturing

India’s private sector activity strengthened in September, driven by a sharper improvement in manufacturing, according to the HSBC Flash India Purchasing Managers’ Index (PMI) released on Wednesday.

The HSBC Flash India Composite Output Index rose to 56.5 in September from 54.3 in August, signalling the strongest expansion in private sector activity since June. Output growth accelerated across both manufacturing and services, while aggregate new orders also increased at a faster pace.

Manufacturing growth hits seven-month high

The HSBC Flash India Manufacturing PMI climbed to 55.7 in September from 52.8 in August, marking the strongest improvement in manufacturing operating conditions in seven months. The Manufacturing PMI Output Index rose to 58.2 from 54.8, while the Services PMI Business Activity Index increased to 55.8 from 54.1.

New business expanded at a faster pace during the month, with demand strengthening across both manufacturing and services. The acceleration was more pronounced among goods producers, where sales growth reached a seven-month high and remained stronger than that recorded by services companies.

Service providers attributed the increase in new orders to marketing efforts and stronger demand for properties, transport services and travel bookings, alongside rising client interest in software and digital solutions. Manufacturers reported stronger demand for aluminium products, electronic items, food, pharmaceutical goods and new models.

“Activity in the private sector gained momentum, led by stronger manufacturing. Output and new domestic orders rose at faster rates,” said Pranjul Bhandari, chief India economist at HSBC. She added that renewed tensions in the Middle East had prompted firms to build buffers to manage uncertainties, while price pressures strengthened among manufacturers.

Export orders moderate, employment remains strong

Despite stronger domestic demand, growth in new export orders moderated. Overseas orders continued to increase across the private sector, but the pace of expansion was the weakest in nearly three years, reflecting slower growth among services companies. Manufacturers, however, recorded a marginally stronger increase in new export business.

Employment rose solidly in September as companies continued to add staff amid sustained growth in output and new orders. Job creation was recorded across both manufacturing and services at broadly similar rates.

Inflationary pressures eased at the broader private-sector level. Input cost inflation slowed to its lowest level since January, as softer cost pressures among services companies more than offset a pickup in manufacturing input costs. Selling price inflation was broadly unchanged overall, although factory-gate price increases accelerated while services firms raised charges at a slower pace.