India’s Manufacturing PMI Hits 17-Year Peak On Strong Domestic And Export Demand

India’s manufacturing sector showed strong momentum in July 2025, with the HSBC Flash Manufacturing Purchasing Managers’ Index (PMI) rising to 59.2, the highest level in nearly 17 and a half years. This marked a sharp jump from 58.4 in June, signalling robust improvement in factory operations driven by solid domestic and overseas demand.

The Composite PMI Output Index, which reflects combined performance in manufacturing and services, stood at 60.7, just below June’s 61.0, but still reflecting the fastest expansion in over a year.

Growth in output, sales, and export orders underpinned the momentum, along with higher investment in technology and capacity building.

Survey responses pointed to improved private sector operating conditions. Total sales posted their fastest growth in a year, fuelled by demand from Asia, Europe, and the US.

Manufacturing-led services showed the highest output growth since April 2024, while services activity remained positive despite a slight easing.

The HSBC Flash India Manufacturing PMI Output Index rose to 62.5 in July from 62.1 in June, while the Services PMI fell slightly to 59.8 from 60.4. Yet, the Composite Output Index stayed far above the long-term average of 54.8, showing sustained expansion in India’s economic activity.

Rising Inflation and Job Market Softness

However, input cost inflation worsened. Companies reported price hikes in aluminium, cotton, steel, rubber, transport, and food items such as vegetables, eggs, and meat. As a result, firms passed on rising costs to consumers, raising output charges.

“Inflationary pressures continue to heat up,” said Bhandari. She added that business confidence dropped to its lowest since March 2023, while employment growth slowed to its weakest in 15 months.

The job slowdown hit services harder, while manufacturing reported a steadier increase in hiring. Backlogs surged, especially in services, pointing to capacity strains.

Manufacturers reported a spike in input purchases and built up inventories, helped by faster supplier deliveries. Yet, stocks of finished goods shrank as firms tapped into existing reserves to meet high demand.

Despite strong India manufacturing PMI data, risks are emerging. Lower business sentiment and slower job creation reflect concern over inflation and intense market competition, even as the broader economy maintains solid growth.

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