India’s manufacturing sector hits 14-month high on export surge

The HSBC India Manufacturing Purchasing Managers’ Index climbed to 58.4 in June, rising from 57.6 in May. This marked the strongest performance since April 2024 and remained significantly above the long-term average of 54.1.

India’s manufacturing sector experienced a strong revival in June 2025, with output growth surging to a 14-month high, largely driven by a spike in export orders. According to a private sector survey by HSBC, the India Manufacturing Purchasing Managers’ Index (PMI) climbed to 58.4 in June, up from 57.6 in May. This marked the highest reading since April 2024 and significantly outpaced the PMI’s long-run average of 54.1, signalling robust expansion.

The survey pointed to a strong finish to the first quarter of FY2025–26, underpinned by rising production, new orders, and a record increase in employment. “The manufacturing sector experienced a strong end to the first fiscal quarter, marked by improved trends in output and new orders, alongside a record upturn in employment,” the report said.

One of the most notable findings of the survey was the sharp increase in external demand. “Companies also welcomed one of the fastest increases in external orders in the over 20 years of survey history,” the report noted. This sharp rise in export orders helped offset domestic sectoral weaknesses, particularly in the consumer and capital goods segments, which both witnessed a slowdown. The surge in activity was driven entirely by intermediate goods manufacturers.

The report attributed the rapid growth in manufacturing production volumes to efficiency gains, favourable underlying demand, and increased sales. These gains have helped manufacturers meet rising demand from international markets.

Pranjul Bhandari, chief India economist at HSBC, remarked, “Robust end-demand fuelled expansions in output, new orders, and job creation. To keep up with strong demand—particularly from international markets, as evidenced by the substantial rise in new export orders—Indian manufacturing firms had to tap deeper into their inventories, causing the stock of finished goods to continue shrinking.”

While demand pressures intensified, cost dynamics in the sector presented a mixed picture. Input cost inflation fell to a four-month low, providing some relief to manufacturers, even though iron and steel prices rose. However, selling prices continued to rise as companies passed on higher costs—especially in freight, labour, and raw materials—to customers. “Average selling prices rose markedly, however, as several firms sought to share additional cost burdens with their clients,” the report said. “In some instances, companies attributed upward revisions to demand buoyancy.”

Overall, the June PMI reading reflects a sector buoyed by global demand and strategic operational improvements. As India’s manufacturing landscape continues to adapt to changing dynamics, including inventory management, labour utilisation, and pricing strategies, the outlook remains positive. However, the divergence in performance across segments highlights the need for targeted support, especially for consumer and capital goods sectors.

With India aiming to establish itself as a global manufacturing hub, the latest data underscores the potential for sustained growth—provided domestic challenges are addressed and global demand remains stable.