India’s Manufacturing PMI Slows to 54.7 in October Despite Strong Export Demand

India’s manufacturing sector continued to expand in October 2026, but the pace of growth moderated as factory output and new orders increased more slowly. The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, declined to 54.7 in October from 55.1 in September, according to data released on November 2. Despite the decline, the index remained comfortably above the 50-point threshold that separates expansion from contraction.

Stronger international demand provided an important source of support, with new export orders recording their fastest growth in six months. Manufacturers reported increased business from markets including the United States, United Kingdom, United Arab Emirates, Saudi Arabia and Bangladesh. At the same time, input-cost inflation eased to its lowest level since February, while selling-price increases slowed to their weakest pace in nearly four years. The latest figures point to continued industrial expansion, although softer domestic demand, slower hiring and weaker business confidence remain areas to watch.

Key Takeaways

• India’s manufacturing PMI declined to 54.7 in October from 55.1 in September.
• The index remained above 50, indicating continued expansion in factory activity.
• New export orders grew at their fastest pace in six months.
• Domestic new-order growth moderated from September’s seven-month high.
• Input-cost inflation eased to its lowest level since February.
• Selling-price inflation fell to its weakest level in nearly four years.
• Factory employment increased for a second consecutive month, but hiring growth slowed.
• Manufacturers increased finished-goods inventories at a record pace.

India’s Manufacturing PMI Falls to 54.7 in October

The HSBC India Manufacturing PMI declined by 0.4 points in October, indicating a moderation in the pace of manufacturing expansion.

Indicator	September 2026	October 2026
Manufacturing PMI	55.1	54.7
PMI expansion threshold	50	50
Direction	Faster expansion	Slower expansion

<text color=”secondary” size=”xs”>Source: HSBC India Manufacturing PMI, compiled by S&P Global.</text>

A PMI reading above 50 indicates that manufacturing activity has expanded compared with the previous month. A reading below 50 indicates contraction.

The October reading therefore does not mean India’s manufacturing sector contracted. Instead, it shows that factories continued growing, but at a slower rate than in September.

The index was also slightly below the preliminary estimate of 54.9 released earlier.

The survey measures changes in several manufacturing indicators, including new orders, production, employment, supplier delivery times and stocks of purchases.

Export Orders Reach a Six-Month High

International demand emerged as one of the strongest drivers of India’s manufacturing activity in October.

New export orders increased at their fastest pace in six months, helping manufacturers maintain production growth despite slower domestic demand.

Companies reported stronger orders from several international markets, including:

• United States
• United Kingdom
• United Arab Emirates
• Saudi Arabia
• Bangladesh
• Canada
• Indonesia
• Nepal
• Oman
• Sri Lanka

The broad-based improvement suggests that Indian manufacturers continued finding customers across multiple export destinations.

Stronger international orders can benefit manufacturers by increasing factory utilisation, supporting production volumes and creating opportunities to expand their customer base.

According to Pranjul Bhandari, HSBC’s chief India economist, strong international demand supported a robust increase in factory output.

However, export growth alone may not be sufficient to offset weaker domestic demand indefinitely. Manufacturers will need both domestic and overseas orders to sustain a stronger expansion.

Domestic Demand and New Orders Lose Momentum

While export demand improved, the growth of total new orders moderated in October.

New business had increased at its fastest pace in seven months during September. The October survey showed that this momentum eased slightly.

The moderation suggests that domestic demand was not expanding as strongly as it had in the previous month.

New orders are an important indicator because they provide manufacturers with an indication of future production requirements.

When orders increase, factories may need to purchase additional raw materials, hire workers and expand production schedules. When order growth slows, companies may become more cautious about future investments and inventory purchases.

The October figures therefore present a mixed picture: international demand strengthened, but overall new-business growth moderated.

Factory Output Continues Growing, but at a Slower Pace

Manufacturing output increased again in October, although production growth slowed compared with September.

The moderation was particularly visible among intermediate-goods manufacturers.

Intermediate goods are products used as inputs in the production of other goods. Examples include chemicals, industrial components, metals and materials used by other manufacturers.

These businesses are important because their performance can influence production across several industries.

Despite the slower pace, the survey indicated that overall factory output continued to rise sharply by historical standards.

The improvement in export demand helped support production, preventing the broader manufacturing sector from experiencing a more significant slowdown.

Input Costs Fall to Their Lowest Level Since February

One of the more positive developments in the October PMI survey was the moderation in input-cost inflation.

Manufacturers reported higher prices for certain raw materials and energy inputs. However, the overall rate of input-cost inflation declined to its lowest level since February 2026.

Cost pressures eased across all three broad manufacturing categories tracked by the survey.

This could provide some relief to businesses that have been dealing with fluctuating raw-material and energy expenses.

Lower input-cost inflation can help manufacturers protect operating margins, particularly when competition makes it difficult to increase selling prices.

The survey also showed that manufacturers increased their selling prices only marginally.

The pace of output-price inflation declined to its weakest level in nearly four years.

This suggests that companies had limited room to pass higher expenses on to customers, potentially because of competitive market conditions and efforts to attract new business.

Manufacturers Increase Inventories at a Record Pace

Another notable development was the sharp increase in manufacturers’ inventories.

Companies accumulated finished goods at a record pace in the survey’s more than 21-year history.

They also increased input inventories at the fastest rate in eight months.

Manufacturers said they were building precautionary stockpiles to prepare for potential supply disruptions and meet future production requirements.

However, the increase in inventories came alongside slower growth in raw-material purchasing.

Purchasing activity continued expanding, but its growth rate was the weakest in the entire 64-month sequence of expansion.

This combination deserves attention.

Companies may be building inventory buffers to protect themselves against supply uncertainty rather than preparing for a major increase in future demand.

If orders remain strong, these inventories could help manufacturers fulfil customer requirements. If demand weakens, however, large stockpiles could create additional storage costs and increase the risk of unsold goods.

Factory Hiring Slows Despite Continued Expansion

Manufacturing employment increased for the second consecutive month in October.

Higher production requirements and growing workloads encouraged some companies to recruit additional workers.

However, the pace of job creation slowed compared with September and remained relatively modest.

The survey also found differences across manufacturing categories. While some manufacturers increased employment, capital-goods producers reduced their workforce.

Capital goods include machinery, equipment and industrial products used by businesses to produce other goods and services.

The slowdown in hiring suggests that manufacturers were not expanding their workforces as quickly as production and export demand might otherwise support.

Employment trends will therefore be an important indicator to monitor in the coming months.

Business Confidence Weakens Despite Strong Exports

Manufacturers became less optimistic about the outlook for the next 12 months.

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

Only around 18% of surveyed manufacturers expected production to increase over the coming year, while the remaining respondents were neutral about the outlook.

Companies cited new customer enquiries and expectations of stronger demand for industrial automation and technology solutions as reasons for optimism.

Nevertheless, the decline in confidence suggests that businesses remain cautious about the broader economic environment.

Potential supply disruptions, uncertain international conditions and uneven domestic demand could influence future production and investment decisions.

The Bigger Picture

India’s manufacturing sector is continuing to expand, but October’s PMI shows that growth is becoming more dependent on international demand as domestic momentum moderates. Stronger export orders provide an important source of support, while lower input-cost inflation could help businesses manage operating expenses.

However, slower hiring and declining business confidence suggest that manufacturers are not yet fully confident about the next phase of growth. The combination of record finished-goods inventory accumulation and slower input purchasing also raises questions about how companies are preparing for future demand. The next few months will help determine whether export strength can sustain manufacturing momentum.

Looking Ahead

Manufacturers will be watching export orders, domestic consumption, raw-material prices and supply-chain conditions to determine production plans for the coming months. If international demand remains strong and cost pressures stay manageable, factory activity could continue expanding. However, a further slowdown in domestic orders or weaker global demand could affect production and employment growth.

For India’s economy, the October PMI remains a positive indicator because it confirms continued manufacturing expansion. But the decline to 54.7 highlights the difference between growth and accelerating growth. Sustained improvement will require stronger domestic demand, continued export opportunities, better hiring momentum and greater confidence among manufacturers.

Frequently Asked Questions

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

India’s HSBC Manufacturing PMI declined to 54.7 in October 2026 from 55.1 in September, according to the survey compiled by S&P Global.

2. Does a manufacturing PMI of 54.7 indicate economic contraction?

No. A PMI reading above 50 indicates expansion. India’s manufacturing sector continued growing in October, although the pace of expansion slowed.

3. Why did India’s manufacturing PMI decline in October?

The decline reflected slower growth in factory output and new orders, alongside weaker domestic demand and slower employment growth.

4. How did India’s export orders perform in October?

New export orders increased at their fastest pace in six months. Manufacturers reported stronger demand from countries including the US, UK, UAE, Saudi Arabia and Bangladesh.

5. What happened to manufacturing input costs?

Input-cost inflation declined to its lowest level since February 2026. Selling-price inflation also eased to its weakest level in nearly four years.

6. Did manufacturing employment increase in October?

Yes. Factory employment increased for the second consecutive month, but the pace of job creation slowed compared with September. Capital-goods manufacturers reduced their workforce.

7. What does the October PMI indicate about India’s manufacturing outlook?

The data indicate continued expansion supported by strong exports and easing cost pressures. However, slower domestic demand, weaker business confidence and subdued hiring remain concerns.

8. Who publishes India’s Manufacturing PMI?

The HSBC India Manufacturing PMI is compiled by S&P Global using monthly questionnaires sent to purchasing managers at approximately 400 manufacturers.