India’s private sector growth moderated slightly in May as softer demand conditions and slowing export orders weighed on manufacturing activity, according to the HSBC Flash India PMI data.
The HSBC Flash India Composite PMI Output Index stood at 58.1 in May, marginally lower than April’s final reading of 58.2. A reading above 50 indicates expansion in activity.
The growth in the services sector improved slightly during the month, while manufacturing activity weakened further. Factory output growth was the second-slowest since mid-2022.
Pranjul Bhandari, Chief India Economist at HSBC, said, “Manufacturing activity eased marginally as the rates of expansion in output and new orders moderated, while growth of new export orders softened markedly.”
“Cost pressures intensified, with input prices rising at the sharpest rate since July 2022,” she added.
Manufacturing growth slows
The HSBC Flash India Manufacturing PMI fell to 54.3 in May from 54.7 in April. The Manufacturing PMI Output Index also eased to 56.6 from 56.9 in the previous month.
| Index | May 2026 | April 2026 |
|---|---|---|
| HSBC Flash India Composite PMI Output Index | 58.1 | 58.2 |
| HSBC Flash India Services PMI Business Activity Index | 58.9 | 58.8 |
| HSBC Flash India Manufacturing PMI Output Index | 56.6 | 56.9 |
| HSBC Flash India Manufacturing PMI | 54.3 | 54.7 |
According to the survey, both manufacturers and service providers reported slower growth in new business during May. Manufacturing firms recorded the second-weakest increase in new orders in nearly four years.
Companies attributed the slowdown in sales growth to competitive pressures, difficult demand conditions, travel disruptions and the ongoing war in the Middle East.
Export demand weakens sharply
The growth in new export orders across the private sector slowed to the weakest pace in 19 months. Manufacturing firms saw the second-slowest rise in international sales since September 2024.
Cost pressures rise
Input cost inflation accelerated in May, especially in the manufacturing sector.
At the composite level, input price inflation rose to the second-highest level in nearly three years. Manufacturing firms recorded the sharpest increase in input costs since July 2022.
Companies reported higher prices for energy, food, fuel, gas, iron, leather, oil, plastics, rubber, steel and transportation.
However, businesses increased selling prices cautiously despite rising costs. Output charge inflation slowed to the weakest pace since January.
Hiring remains strong
Despite softer demand growth, companies continued hiring during the month as business confidence remained positive.
Service providers increased hiring at the fastest pace in nearly a year, while manufacturers also added jobs, although at a slower pace than in April.
The survey showed that overall business optimism slipped to a three-month low but remained above the long-run average.
Inventory levels rise
Manufacturers continued to build inventories in May amid stable supply conditions.
Purchasing activity rose at the fastest pace in three months, while stocks of purchases also increased sharply. Inventories of finished goods rose for the second consecutive month and recorded the strongest increase in 11 years.