India's Manufacturing Growth Slows In June As PMI Drops To 54.2

India’s manufacturing sector recorded slower growth in June as momentum in new orders and international sales weakened, leading to a moderation in output, employment, and purchasing activity, according to a monthly survey released on Wednesday.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) slipped to 54.2 in June from 55.0 in May.

The reading signals continued expansion in the sector, though at the slowest pace in recent months and marking the second-weakest improvement in business conditions since mid-2022.

The PMI is a composite indicator based on key factors such as new orders, output, employment, supplier delivery times, and inventories. A reading above 50 indicates expansion, while a figure below 50 signals contraction.

The survey noted that while several manufacturers reported improving demand conditions, others faced subdued client interest and heightened competition, which weighed on overall growth.

According to HSBC, the moderation reflects a cooling of demand after a strong surge earlier in the year linked to geopolitical disruptions in West Asia.

Growth in output, new orders, export orders, and employment all slowed during the month. International sales, in particular, registered their weakest growth since March 2023, with exporters reporting softer demand from key markets, especially in Europe.

On pricing trends, easing demand reduced pressure on manufacturers to raise prices.

Both input and output price inflation moderated, with selling price increases at their weakest pace in three months, indicating softening inflationary pressures as geopolitical tensions begin to ease.

Employment conditions also reflected caution among manufacturers. Stable workloads and weaker demand led firms to either slow down or pause hiring activity.

Backlogs of work remained largely unchanged, while job creation expanded at its slowest rate so far in 2026.

Business sentiment also weakened in June. The proportion of firms expecting higher output over the next year fell sharply compared to May, with many manufacturers adopting a neutral outlook amid uncertainty over demand conditions. Overall optimism declined to a five-month low.

The HSBC India Manufacturing PMI is compiled by S&P Global based on surveys of approximately 400 manufacturing companies across India, offering a broad view of sectoral performance.