India’s manufacturing sector slowed modestly in December, signalling a cooling of momentum rather than a loss of strength. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) eased to 55.0 from 56.6 in November, marking the slowest pace of expansion in over three years. Even so, the index remained well above the 50 threshold, underscoring continued growth and a resilient industrial base as the year drew to a close.
According to S&P Global data, manufacturing activity stayed above its long-run average, reflecting steady demand conditions through the final quarter of 2025. While new orders and production continued to rise, the pace softened amid intensifying competition and slower sales in select segments.
Growth in new business moderated to its weakest level since December 2023, while factory output expanded at the slowest rate since October 2022. Manufacturers responded with a more measured approach to purchasing, resulting in the smallest increase in input buying in nearly two years. Despite this caution, procurement activity remained in expansionary territory, pointing to confidence in future demand.
Inflationary pressures remained subdued. Input costs rose at a historically negligible pace for the third consecutive month, while output price inflation eased to a nine-month low. The benign cost environment helped preserve margins and supported demand at a time when global manufacturers continue to face pricing pressures.
External demand showed some signs of fatigue. Growth in export orders slowed to a 14-month low, with fewer firms reporting higher international sales. Nonetheless, demand from Asia, Europe and the Middle East provided a degree of stability, preventing a sharper pullback.
In a broader context, India’s manufacturing PMI averaged 53.37 between 2012 and 2025, reaching an all-time high of 59.3 in August 2025 and a historic low of 27.4 during the pandemic-driven downturn of April 2020. December’s reading reflects a sector transitioning from rapid expansion to a more sustainable growth path.
Looking ahead to 2026, manufacturers remain cautiously optimistic. Firms expect output to rise, supported by advertising initiatives, favourable demand trends and new product launches. While concerns around competitive intensity and market uncertainty persist, India’s relatively lower cost pressures could help its manufacturers remain competitive in the global marketplace.