India’s private sector continued to expand in June, but the pace of growth slowed as weaker demand conditions weighed on both manufacturing and services activity, according to the HSBC Flash India PMI report released on Tuesday.
The HSBC Flash India PMI Composite Output Index declined to 57.4 in June from 59.3 in May. While the reading remained well above the 50-mark that separates growth from contraction, it represented the slowest pace of expansion since March.
The moderation was visible across both major sectors of the economy. Manufacturing output growth eased during the month, while services activity expanded at its weakest pace in nearly one-and-a-half years.
Manufacturing PMI Falls to Three-Month Low
The HSBC Flash India Manufacturing PMI edged down to a three-month low of 54.5 in June, compared with 55.0 in May, indicating that factory activity continued to grow but at a slower rate.
Pranjul Bhandari, Chief India Economist at HSBC, said, “Private sector activity eased a bit in June. Growth of manufacturing output softened a tad as inventory-building lost steam after a few hectic months.”
According to the report, overall new business inflows continued to increase, but the pace of growth slowed to a three-month low. Companies across sectors reported challenges in attracting new customers amid intense market competition. Higher fuel prices and gas shortages were also cited as factors affecting business operations.
“New export orders remained resilient and the order-to-inventory ratio ticked up, pointing at resilient manufacturing activity down the line. Input costs across the private sector rose, but at the slowest pace in five months,” Bhandari added.
The services sector also witnessed a slowdown, with business activity growing at its weakest rate in 17 months. The report attributed the moderation in overall private sector performance to softer demand conditions and ongoing cost pressures.
Hiring Growth Slows as Business Confidence Weakens
The softer demand environment was reflected in employment trends, with hiring activity losing momentum during June. Employment increased only marginally, marking the weakest pace of job creation in the current six-month sequence of expansion.
Recruitment activity among both manufacturers and service providers fell to its lowest level since December 2025, as many firms considered their existing workforce sufficient to handle current workloads. Outstanding business volumes remained broadly unchanged during the month.
On the cost front, companies continued to face higher expenses due to rising prices of chemicals, food items, fuel, gas, metals and utilities. However, input cost inflation eased for the third consecutive month and reached its lowest level since January.
Businesses remained cautious while passing on higher costs to consumers. Selling price inflation at the composite level softened to a six-month low as competitive pressures and weaker demand limited pricing power.
Looking ahead, firms continued to expect growth over the coming year, but confidence weakened. Overall business optimism fell to its lowest level since January, while sentiment among manufacturers slipped to a near four-year low. The weaker outlook also contributed to a slowdown in purchasing activity, which expanded at its slowest pace in two-and-a-half years and resulted in lower finished goods inventories.