India's manufacturing PMI growth slows in June as demand softens

India's manufacturing activity slowed in June as softer domestic and overseas demand weighed on output, new orders, exports and hiring, even as easing cost pressures provided relief to businesses, according to the HSBC India Manufacturing Purchasing Managers' Index (PMI) released on Wednesday.

The seasonally adjusted HSBC India Manufacturing PMI fell to 54.2 in June from 55.0 in May. Although the index remained well above the 50-mark that separates expansion from contraction, it marked the second-weakest improvement in manufacturing activity since mid-2022, ahead only of March this year.

The survey showed that growth in both output and new orders, excluding March, was among the slowest recorded in the past four years. While some manufacturers continued to benefit from healthy demand, others reported weaker client interest and intense competition. The slowdown was led by capital goods producers, while consumer and intermediate goods manufacturers posted relatively stronger growth.

Export demand also weakened during the month, with overseas sales rising at the slowest pace in 39 months. Several firms attributed the moderation to subdued demand from European markets.

With demand easing, manufacturers were less willing to increase prices. Selling price inflation slowed to a three-month low, while input cost inflation eased to its weakest level since February. Companies, however, continued to report higher costs for chemicals, metals, petroleum products, plastics, electronic items, gas, rubber and wood.

"India's manufacturing PMI eased to 54.2 in June from 55.0 in May, signalling continued expansion but at a slower pace," said Pranjul Bhandari, Chief India Economist at HSBC. She noted that growth weakened across output, new orders, export orders and employment, while both input and output price indices declined, indicating softer inflationary pressures as geopolitical disruptions began to ease.

The moderation in demand also affected purchasing activity and hiring. Growth in input buying slowed to its weakest pace in two-and-a-half years, while finished goods inventories declined at the fastest rate in six months as firms aligned production with demand. Employment expanded at its slowest pace so far in 2026, with most companies keeping workforce levels unchanged.

Business sentiment also weakened. The proportion of manufacturers expecting higher output over the next 12 months fell sharply from May, pushing overall optimism to a five-month low amid continued concerns over demand and market conditions.