India’s Manufacturing Activity Slows to Two-Year Low in December as Demand Momentum Eases: PMI

 India’s manufacturing sector recorded its slowest growth in two years in December, as softer domestic and export demand weighed on new orders and production, according to a monthly survey released on Friday.

India’s Manufacturing Activity Slows to Two-Year Low in December as Demand Momentum Eases: PMI

The HSBC India Manufacturing Purchasing Managers’ Index (PMI) declined to 55.0 in December, down from 56.6 in November, marking the lowest reading since December 2023, data compiled by S&P Global showed.

Despite the slowdown, the index remained above the 50-point threshold, which separates expansion from contraction, indicating that manufacturing activity continued to grow, albeit at a more moderate pace.

Slower Growth in Orders and Output

Manufacturers reported continued expansion in new orders and output, but at reduced rates. Firms cited competitive pressures and weaker sales across certain product categories as key factors behind the deceleration.

“Even with growth momentum easing, India’s manufacturing industry wrapped up 2025 in good shape,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

She added that while growth softened, new business inflows remain supportive, and limited inflationary pressures could help sustain demand in the near term.

Export Demand Loses Momentum

New export orders rose at their slowest pace in 14 months, reflecting subdued overseas demand. Survey participants pointed to weaker global conditions, though some improvement was noted in orders from Asia, Europe, and the Middle East.

According to S&P Global, the share of manufacturers reporting higher international sales in December was significantly lower than the 2025 average, with export activity concentrated across fewer regions.

Employment and Purchasing Activity Moderate

Employment growth cooled further, with factory hiring increasing at the slowest pace in the current 22-month expansion phase. Firms also reported a more cautious approach to input purchases, as purchasing activity rose at its weakest rate in two years.

Inflation Pressures Remain Contained

Input cost inflation stayed subdued, rising at one of the lowest rates recorded in 2025, while output price inflation eased to a nine-month low. The easing cost environment provided some relief to manufacturers amid softer demand conditions.

Outlook for 2026

Looking ahead, Indian manufacturers expect output levels to improve in 2026, though overall business confidence slipped to its lowest level in nearly three-and-a-half years.

While factors such as advertising efforts, positive demand trends, and new product launches were seen as supportive, some firms expressed concerns over intensifying competition and market uncertainty.

“With Indian manufacturers facing less intense cost pressures than in other regions, competitive pricing could help attract new business in the coming year,” De Lima said.