Manufacturing PMI Falls in October as Export Demand Remains Strong

India's manufacturing activity moderated slightly in October 2026, with the HSBC India Manufacturing Purchasing Managers' Index (PMI) declining to 54.7 from 55.1 in September. However, the manufacturing sector continued to expand, supported by strong export demand, higher production and new business orders. At the same time, selling price inflation declined to its lowest level in nearly four years.

Why in the News?

According to the latest survey compiled by S&P Global, India's Manufacturing PMI declined to 54.7 in October 2026, compared to 55.1 in September.

• The Purchasing Managers' Index (PMI) remained above the 50-point mark, indicating continued expansion in manufacturing activity.
• New export orders increased at their fastest pace in six months.
• Selling price inflation declined to its lowest level in nearly four years.
• Manufacturers increased input inventories to manage potential supply shortages.
• Employment increased for the second consecutive month, although job creation remained marginal.
• Business confidence weakened despite strong demand conditions.

What is the Purchasing Managers' Index (PMI)?

The Purchasing Managers' Index (PMI) is an economic indicator used to measure the performance and overall business conditions of the manufacturing and services sectors.

• It is based on monthly surveys of purchasing managers in companies.
• It measures changes in factors such as new orders, output, employment, supplier delivery times, and inventories.
• The index helps assess whether business activity is expanding or contracting. Interpretation of PMI:

India's Manufacturing PMI (October 2026):

Export Orders Grow at Fastest Pace in Six Months

Strong international demand emerged as a major driver of India's manufacturing activity in October.

• New export orders increased at their fastest pace in six months.
• Manufacturers received higher orders from several international markets, including:
  • Bangladesh
  • Canada
  • Indonesia
  • Nepal
  • Oman
  • Saudi Arabia
  • Sri Lanka
  • United Kingdom
  • United States
  • United Arab Emirates
• Strong export demand, domestic sales, and new product launches supported an increase in factory production.

However, output growth moderated compared to September due to slower expansion among intermediate goods manufacturers. Intermediate goods producers continued to lead the overall increase in manufacturing output.

Inflationary Pressures Ease in Manufacturing

The survey indicated a decline in inflationary pressures across India's manufacturing sector.

• Manufacturers reported higher prices for certain raw materials and energy inputs.
• However, the overall rate of input cost inflation declined to its lowest level since February.
• Cost pressures moderated across all three broad manufacturing categories.
• Manufacturers continued to increase selling prices to protect their profit margins.
• However, the increase in selling prices remained marginal and was the weakest in nearly four years.

Factory Hiring Slows Despite Rising Workloads

Manufacturing employment increased for the second consecutive month in October as companies responded to higher production requirements and rising workloads.

• Companies expanded their workforce to meet increasing business requirements.
• However, the pace of job creation weakened and remained marginal.
• Some manufacturing categories recorded an increase in employment.
• Capital goods producers reduced their workforce during the month.
• Outstanding business volumes increased for the seventh consecutive month, although the rate of accumulation remained negligible.

Manufacturers Build Inventories to Guard Against Shortages

Manufacturers continued to increase their inventories to meet rising production requirements and reduce the risk of supply disruptions.

• Stocks of finished goods increased at an unprecedented pace as companies prepared to meet strong demand and prevent shortages.
• Inventories of production inputs also increased.
• The pace of input inventory accumulation reached an eight-month high.
• However, growth in input purchases weakened despite the increase in inventories.
• Purchasing activity expanded for the 64th consecutive month, although the rate of growth was the weakest during this period.

Business Confidence Weakens Despite Robust Demand

Despite continued growth in production and new orders, manufacturers became less optimistic about the future business outlook.

• Business confidence declined compared to September.
• It remained below its long-run average.
• Nearly 18% of manufacturers expected production to increase over the next 12 months.
• The remaining respondents expected production levels to remain unchanged.

Factors Supporting Business Optimism:

• New client enquiries.
• Expectations of stronger demand.
• Increasing demand for industrial automation.
• Growing demand for technology solutions.

Conclusion

India's manufacturing sector continued to expand in October 2026 despite a slight decline in PMI. Strong international demand and new export orders supported production growth, while easing price pressures provided some relief to manufacturers. However, slower job creation and declining business confidence remain areas of concern. Sustaining manufacturing growth will require stronger domestic and international demand, higher productivity and better employment generation.