India’s private-sector activity improved marginally in August, supported by a recovery in the services sector. However, manufacturing growth weakened further, slowing to its weakest pace in five years.
The HSBC Flash India Composite PMI Output Index rose to 54.6 in August from 54.3 in July, when private-sector activity had fallen to a 52-month low. The Flash India Services PMI Business Activity Index rose to 54.5 in August from 53.3 in July, indicating a modest recovery in services activity.
Meanwhile, the Flash India Manufacturing PMI fell to 52.9 in August from 53.5 in July, marking the weakest expansion in manufacturing activity in five years.
A PMI reading above 50 indicates an expansion in activity, while a reading below 50 signals contraction. Although the August composite reading remained in expansion territory, it was still the second-weakest reading since March 2022.
| HSBC PMI indicator | August | July final |
|---|---|---|
| Composite PMI Output Index | 54.6 | 54.3 |
| Services PMI Business Activity Index | 54.5 | 53.3 |
| Manufacturing PMI Output Index | 54.9 | 56.4 |
| Manufacturing PMI | 52.9 | 53.5 |
Services sector leads growth
Services activity and new business growth picked up after both had recorded their weakest upturns in 53 months in July.
Companies also reported a slightly stronger increase in new orders during August. However, growth remained subdued compared with recent years as challenging market conditions, competitive pressures and lower customer requirements weighed on demand.
Manufacturing growth hits five-year low
The Manufacturing PMI pointed to a historically soft improvement in overall factory conditions. The manufacturing output index fell to 54.9 in August from 56.4 in July, while the headline Manufacturing PMI declined to 52.9 from 53.5.
Job creation strengthens
Employment emerged as a key positive in the August survey. Job creation across India’s private sector accelerated to the joint-fastest pace since June 2025, matching the pace recorded in April 2026.
The increase in hiring was largely driven by services companies, which said they needed more workers to meet rising demand. In contrast, manufacturing companies reduced staffing levels for the first time in two-and-a-half years.
Stronger hiring in services also helped companies clear outstanding business. At the overall private-sector level, backlogs declined at the steepest rate in five years, although the decline remained modest.
Export orders continue to rise
Export orders continued to increase across India’s private sector in August, although the pace of growth eased in both manufacturing and services.
Companies reported stronger orders from major export markets, including the US, Germany, China, Singapore and Japan.
Cost pressures ease, but companies raise prices faster
Input costs continued to rise in August, particularly for electricity, raw materials such as steel, transport and technology. However, the overall increase in input costs was the softest in seven months.
Despite easing input-cost pressures, companies increased their selling prices at a faster pace. The overall rise in charges was the strongest since April, with firms pointing to increased efforts to pass higher costs on to customers.
Business confidence improves
Companies also became slightly more optimistic about the year ahead. Business expectations improved in both manufacturing and services compared with July, reflecting hopes of better market conditions.
Commenting on the data, Pranjul Bhandari, Chief India Economist at HSBC, said, “Overall private sector output growth was broadly steady, helped by stronger services activity. Manufacturing growth weakened further in August, marking the softest improvement in five years.”
“Output and new orders still rose, but at a slower pace. Stock of finished goods remained high even though input buying slowed. Cost pressures eased, but firms raised selling prices faster, pointing to stronger pass-through,” Bhandari said.