India’s Manufacturing PMI Hits 17½-Year Peak Amid Strong Demand and Output Surge

India’s manufacturing sector reached a milestone in August, with the HSBC India Manufacturing Purchasing Managers’ Index climbing to 59.3, up from 59.1 in July—its highest level since February 2008. This marks the fastest improvement in operating conditions in nearly 17½ years, underscoring a rapid acceleration in industrial activity.

The surge in the PMI reflects a sharp pick-up in production, signaling robust output growth—the strongest in almost five years. Firms attribute this momentum to sustained domestic demand and successful alignment of supply with buyer orders. Notably, new orders remained buoyant, maintaining the rapid pace observed in previous months and contributing to a healthy pipeline of work.

On the export front, though growth eased to its slowest in five months, it remained historically strong. Indian manufacturers continue to secure business from clients across Asia, Europe, the Middle East, and the U.S., even as rising trade tensions and steep U.S. tariffs weigh on sentiment. Analysts believe strong domestic demand cushioned the impact of weaker international orders, while overall business confidence among manufacturers rebounded from a three-year low.

Cost pressures intensified, with both input and output prices rising to their highest levels in three months. Manufacturers reported higher costs for inputs such as bearings, textiles, steel, and electronic components. Despite this, healthy demand enabled firms to pass on price increases to buyers, sustaining margins for now.

Hiring continued for the 18th consecutive month, although the rate of expansion slowed from previous highs. Companies also worked to rebuild inventories, with purchasing activity increasing at the fastest pace in 16 months. Input delivery times shortened, suggesting improved supply chain efficiency.

These manufacturing developments dovetail with India’s strong macroeconomic performance. The economy recorded a 7.8% GDP growth in the April-June quarter, marking a five-quarter high—driven in part by double-digit expansion in manufacturing and construction. Although some economists caution that this figure may be slightly overstated due to low deflators affecting real growth estimates, the robust performance underscores India’s economic resilience.

Nonetheless, looming trade pressures could challenge sustained momentum. U.S. tariffs of 50% on major Indian exports such as apparel, jewelry, chemicals, and furniture pose risks to export-driven sectors. While overall PMI readings remain elevated, analysts are watching closely to see if elevated input costs and external headwinds might throttle growth in the months ahead.

Manufacturing currently accounts for about 17% of India’s GDP, and its strong August performance sends a positive signal for the broader economy. Coupled with a composite PMI that surged to record highs—driven by both manufacturing and services—it suggests continued private-sector strength across industries.