India’s manufacturing PMI slips to 57.6 in May

India’s manufacturing sector saw slower growth in May, with the PMI falling to 57.6. Despite strong domestic and export demand, output and new order growth hit three-month lows. Firms faced rising input, freight, and labour costs, leading to the sharpest increase in selling prices in over 11 years.

India’s manufacturing sector recorded its slowest improvement in operating conditions since February, with the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) falling from 58.2 in April to 57.6 in May. Despite the dip, the index remained well above the neutral level of 50.0 and its long-term average of 54.1, reflecting continued expansion.

According to the latest data, business conditions improved solidly in May, although the growth in new orders and production slowed to a three-month low. These metrics, however, remained comfortably above their historical norms. 

Export orders provided a significant boost, increasing at one of the fastest rates in the past three years, driven by strong demand from regions such as Asia, Europe, the Middle East, and the United States. In response to these positive sales trends, manufacturers raised input purchases and expanded their workforce. Hiring surged to a record high, with permanent roles being created more frequently than short-term positions.

Input costs rose sharply in May, marking the highest increase in six months. Key contributors to cost inflation included aluminium, cement, iron, leather, rubber, and sand. Companies also faced higher freight and labour costs. These rising expenses led manufacturers to raise their selling prices at the fastest pace in over 11 years, supported by strong demand.

Panelists reported that strong demand—both domestic and international—continued to support sales and output. Still, growth momentum was partially offset by rising competition, inflationary pressures, and ongoing geopolitical tensions, particularly the India-Pakistan conflict.