India's manufacturing sector is showing strong performance, with the HSBC India Manufacturing Purchasing Managers' Index (PMI) reaching a 14-month high of 58.4 in June 2025, up from 57.6 in May. This is the highest print since April 2024. The PMI is a key indicator of manufacturing activity, with a reading above 50 indicating expansion. The June figure signals a substantial improvement in the overall health of the manufacturing sector and comfortably sits above the long-run average of 54.1.
The expansion is fueled by robust end-demand, leading to increased output, new orders, and job creation. Manufacturers increased input buying at the sharpest pace in over a year, and pre-production inventories rose in tandem. Production volumes have expanded at the fastest rate since April 2024, supported by favorable underlying demand, greater sales volumes, and efficiency gains. The growth has been primarily led by intermediate goods producers, although there has been a slowdown in the consumer and capital goods segments.
A significant factor driving the manufacturing growth is the substantial rise in new export orders. The rate of new export order growth in June was the third highest since data collection began in March 2005. Strong demand from international markets, particularly the U.S., has contributed to this surge. This increase in export orders may indicate a potential shift in production to India, as businesses adapt to the evolving global trade landscape.
The increase in new orders has influenced purchasing activity and input stocks. Pre-production inventories rose at a quicker pace than in May, while the surge in buying volumes was the greatest since April 2024. However, inventories of finished goods fell again as businesses had to tap into warehouses to fulfill demand growth.
Employment growth was another bright spot, reaching its highest level in the current series, reflecting strong business confidence. The manufacturing sector experienced a strong upturn in employment, with firms hiring additional staff at an unprecedented pace.
On the price front, input cost inflation cooled to a four-month low, although firms still reported higher freight, labor, and metal costs. Despite the easing of input prices, companies continued to raise their selling prices, passing on expenses to customers. Average lead times shortened at the fastest pace in five months, indicating improvements in supply chain performance.
Despite the strong performance and surge in exports, business confidence has experienced a dip. Uncertainties surrounding competition, inflation, and changes in consumer preferences have weighed on sentiment. Some manufacturers have expressed caution over future growth, citing these concerns.
