New Delhi, Oct 1: India’s manufacturing sector regained momentum in September, supported by stronger domestic and international demand, higher new orders and a pickup in hiring. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 55.1 in September from 52.8 in August, marking the strongest improvement in manufacturing conditions in seven months.
A PMI reading above 50 indicates expansion, making the September reading a sign that factory activity continued to grow, while the pace of expansion strengthened considerably from the previous month.
Stronger demand supports new orders
The improvement was led by a sharper increase in new orders, with domestic demand strengthening and export orders also showing improvement. New orders recorded their fastest growth since February, supporting higher production among manufacturers.
The pickup in demand is important for businesses because stronger order books can encourage manufacturers to increase production, replenish inventories and step up procurement of raw materials and other inputs.
Hiring conditions improve
The September survey also pointed to an improvement in employment conditions. Manufacturers increased hiring as stronger output and new orders created additional requirements for workers.
The improvement comes after manufacturing employment had weakened in August, when the sector recorded its first contraction in employment in around two and a half years.
For the broader economy, a combination of stronger factory activity and improved hiring can support household incomes, consumption and business investment.
Business confidence strengthens
Manufacturers also became more optimistic about the year ahead. Business confidence rose to a four-month high, supported by stronger enquiries and expectations of favourable demand conditions.
The improvement in sentiment could encourage companies to plan additional production and investment, although businesses continue to monitor global demand, input costs and geopolitical risks.
Manufacturing recovery adds to wider industrial momentum
The September PMI improvement comes shortly after official data showed that India’s industrial production grew 8 per cent year-on-year in August, while manufacturing output increased 9 per cent. Capital goods output also recorded strong growth, indicating continued activity in investment-linked segments.
Together, the indicators point to improving momentum across parts of India’s industrial economy at the beginning of the second quarter of FY27.
Cost pressures remain a factor
Despite the improvement in demand, manufacturers continue to face cost considerations. Input-cost pressures picked up during September, with businesses reporting higher expenses for items including electrical components, food, fuel, metals, pharmaceutical ingredients and technology-related resources. Factory-gate price inflation also strengthened.
For companies, the balance between stronger sales and rising input costs will remain important for profitability in the coming months.
Overall, the September PMI data points to a clear improvement in manufacturing activity, with stronger orders, rising employment and better business confidence providing support to the sector, while input costs and global uncertainties remain areas to watch.