India Private Sector Growth Hits Four-Month High in October: HSBC Flash PMI

India’s private-sector business activity expanded at its fastest pace in four months in October 2026, as stronger new orders and an improvement in services activity lifted the HSBC Flash India Composite Output Index to 56.7 from 55.9 in September. The latest reading exceeded the median forecast of 56.1 in a Reuters poll and signalled continued expansion in the manufacturing and services sectors.

However, the recovery was uneven. Services activity strengthened, manufacturing output edged higher, and export orders accelerated, but employment growth slowed sharply. Services companies stopped adding staff after nine consecutive months of employment growth, while manufacturers increased hiring only marginally. At the same time, input-cost inflation eased to its lowest level in almost a year, offering some relief to businesses facing cost pressures.

Key Takeaways

• Composite PMI: Rose to 56.7 in October from 55.9 in September, marking a four-month high.
• Services PMI: Increased to 56.2 from 55.2, becoming the main driver of the acceleration.
• Manufacturing PMI: Slipped to 54.9 from 55.1, despite a slight improvement in factory output.
• Export orders: Expanded at their fastest pace in six months, supported by stronger international demand.
• Employment: Growth slowed to its weakest pace of 2026 so far, with services-sector hiring unchanged.
• Input costs: Inflation eased for a seventh consecutive month to its lowest level in nearly a year.
• Selling prices: Increased at their slowest pace since March 2025, suggesting softer pricing pressure.

What the October PMI Data Shows

The HSBC Flash India Composite Output Index increased by 0.8 points to 56.7 in October. The index combines activity indicators from India’s manufacturing and services sectors and provides an early assessment of the direction of private-sector business activity.

A PMI reading above 50 indicates expansion compared with the previous month, while a reading below 50 signals contraction. October’s reading therefore indicates that business activity continued to grow, with the pace of expansion improving from September.

The composite index has now remained above the 50-point threshold for 63 consecutive months, according to Business Standard. However, the latest reading remained below the average recorded during 2026, indicating that the four-month high should not automatically be interpreted as a return to the strongest growth rates seen earlier in the year.

The flash PMI is a preliminary survey estimate compiled by S&P Global for HSBC. It is based on approximately 90% of the monthly survey responses used in the final PMI release, meaning the final figures may differ.

Services Sector Leads the Acceleration

The HSBC India Services PMI Business Activity Index rose to 56.2 in October from 55.2 in September. This improvement made services the principal contributor to the acceleration in overall private-sector activity.

Services companies benefited from stronger demand and increased new business. The improvement suggests that activity across India’s large services economy remained resilient even as businesses became more cautious about expanding their workforces.

Services-sector performance matters because the industry includes a broad range of activities, from information technology and professional services to transport, tourism, finance and other business-facing operations. Stronger activity can support revenue growth, although the PMI survey does not directly measure the industry’s contribution to gross domestic product.

The employment figures, however, indicate that companies were able to accommodate additional work without increasing headcount. Services firms kept staffing levels unchanged, ending a nine-month run of job creation.

This divergence between business growth and hiring will be important to watch in coming months. If demand remains strong, companies may eventually need additional workers. Alternatively, productivity improvements and the use of existing capacity could allow businesses to manage higher workloads without a comparable increase in employment.

Manufacturing Output Improves Despite a Lower PMI

The manufacturing picture was more mixed. India’s Manufacturing PMI slipped to 54.9 in October from 55.1 in September, indicating that overall manufacturing conditions continued to improve, but at a slightly slower pace.

The decline in the headline manufacturing PMI was linked partly to slower recruitment. At the same time, the Manufacturing Output Index edged up to 57.6 from 57.5, showing that factory production continued to expand at a slightly faster pace.

These measures capture different aspects of manufacturing. The headline PMI incorporates factors such as new orders, output, employment, supplier delivery times and stocks of purchases. The output index focuses specifically on production activity.

Manufacturers reported stronger international orders, with demand from the United States, the United Kingdom, West Asia and Bangladesh supporting export business. HSBC’s chief India economist, Pranjul Bhandari, said the fastest increase in new export orders since June 2025 was notable even though overall new-order growth remained broadly steady.

The data suggests that export demand is becoming an important source of support for manufacturers. However, future performance will depend on the durability of overseas demand, production costs and the ability of companies to meet orders efficiently.

Export Orders Reach a Six-Month High

International demand was one of the strongest features of the October survey. Overall export orders expanded at their fastest pace in six months, providing support to Indian businesses across the private sector.

The improvement was not uniform. Goods producers recorded stronger foreign demand, while the increase in overseas requests for services weakened. This distinction suggests that manufacturing exports were gaining momentum even as services exporters experienced a less pronounced improvement.

Export growth can support factory utilisation, business revenue and foreign-exchange earnings. It can also help companies diversify beyond domestic demand. However, PMI export-order data measures the direction and pace of change reported by survey respondents; it does not provide a direct estimate of export values in rupees.

The next few months will show whether the increase in overseas orders translates into higher shipments and sustained production growth.

Hiring Slows Despite Stronger Business Activity

Employment was one of the clearest areas of weakness in the October survey. Overall hiring increased only marginally and at its slowest pace so far in 2026.

Services companies kept staffing levels unchanged, ending nine consecutive months of employment growth. Manufacturers continued adding employees, but only slightly.

The survey also found that companies’ backlogs of work fell for the third time in four months. The rate of depletion was jointly the strongest in nearly six-and-a-half years, indicating that firms were working through unfinished orders rather than accumulating additional pending work.

A decline in backlogs is not necessarily a negative signal on its own. It can reflect improved operational efficiency or the completion of previously outstanding projects. However, when combined with weaker hiring, it may also suggest that companies are handling workloads with existing employees rather than expanding capacity.

For policymakers and businesses, the important question is whether stronger demand will eventually lead to broader job creation. Continued growth without a corresponding improvement in employment could limit how widely the benefits of expansion are felt by households.

Input-Cost Inflation Eases to a Near-One-Year Low

The October PMI also brought encouraging news on business costs. Input-cost inflation eased for the seventh consecutive month to its lowest level in almost a year, with softer cost pressures reported in both manufacturing and services.

Where input prices increased, companies cited higher steel and transportation costs. Nevertheless, the overall pace of input-cost inflation slowed, suggesting that pressure on operating expenses was moderating.

Selling-price inflation also eased to its slowest pace since March 2025. Factory-gate charges rose at their softest pace in almost four years, according to the survey.

Lower cost pressure can help businesses protect margins or avoid passing higher expenses on to customers. But slower selling-price increases can also limit revenue growth if companies cannot compensate through higher sales volumes or improved productivity.

The figures are survey-based indicators of the direction and speed of price changes, not official consumer inflation data. They should therefore be considered alongside India’s retail inflation, wholesale prices and other economic indicators.

The Bigger Picture

October’s PMI results show that India’s private sector entered the month with improving business momentum, led by services and supported by a strong increase in export orders. Manufacturing production continued to expand, while easing input-cost inflation offered some relief to businesses. Together, these indicators suggest that private-sector activity remained on a growth path.

The main concern is the limited improvement in employment. Companies reported stronger demand but made little progress in expanding their workforces, while backlogs continued to decline. The next PMI releases will help determine whether the October acceleration is sustained and whether stronger orders begin to translate into more hiring and a broader improvement in business conditions.

FAQs

1. What was India’s composite PMI in October 2026?

The HSBC Flash India Composite Output Index rose to 56.7 in October from 55.9 in September, its highest reading in four months.

2. What does a PMI reading above 50 mean?

A reading above 50 indicates that business activity is expanding compared with the previous month. A reading below 50 indicates contraction, while 50 signals no change.

3. Why did the services sector drive growth?

The Services PMI rose to 56.2 from 55.2, reflecting stronger business activity and demand. The improvement in services was the main contributor to the acceleration in the composite index.

4. Why did manufacturing PMI fall despite higher output?

The headline Manufacturing PMI slipped to 54.9 from 55.1, partly because factory hiring slowed. The separate Manufacturing Output Index edged up to 57.6 from 57.5, showing that production itself continued to improve.

5. What does the October PMI say about jobs and inflation?

Hiring increased only marginally, with services employment unchanged and manufacturing recruitment weak. Meanwhile, input-cost inflation eased to its lowest level in almost a year, and selling-price inflation slowed.

Looking Ahead

The next set of PMI figures will help establish whether October’s stronger activity marks a sustained improvement or a temporary acceleration. Export orders, domestic demand, manufacturing output and the pace of services growth will be important indicators of momentum heading into the final months of 2026.

Employment will be equally important. If companies continue to report stronger orders without adding workers, the expansion may rely increasingly on existing capacity and productivity. A broader recovery would be more evident if business growth remained firm while hiring strengthened and cost pressures stayed manageable.