PMI data: India’s manufacturing growth falls in December on slower growth in output and new export orders

India's manufacturing purchasing managers’ index (PMI) fell to 55.0 in December from 56.6 in November, marking the weakest improvement in the health of the sector in two years. The decline was driven by weaker growth in output and sales, with positive sentiment towards output prospects slipping to its lowest level since October 2022 and new export orders rising at their slowest pace in 14 months.

The PMI figure is compiled by S&P Global and released by HSBC, and a reading above 50 indicates an expansion in activity. The December reading was also above its long-run average of 54.2.

The manufacturing PMI indicates the health of the manufacturing sector, signaling expansion, contraction or stagnation in areas such as new orders, production, employment, and inventories, making it a crucial, early indicator of overall economic trends and future growth for businesses, investors, and policymakers

Despite the month-on-month fall in the PMI, India's manufacturing industry registered another round of impressive growth, with total new orders and output again expanding at above-trend rates, though at a slower pace than earlier, according to the survey.

The Indian economy experienced several challenges in 2025. The US tariff issue cast a shadow for nine months, leading to volatility in the markets. Despite these challenges, India exports registered 5.43% growth in April-November while GDP growth zoomed 8.2% in Q2 FY26 and 8% in H1 FY26. Manufacturing also performed well, as indicated by index of industrial production (IIP) data available till November.

‘Loss of growth momentum’

The PMI survey read, “The end of the 2025 calendar year was characterised by a loss of growth momentum across several measures tracked by the HSBC India Manufacturing PMI survey. Positive demand trends continued to underpin sharp increases in new business intakes and production, but rates of expansion eased on the back of competitive pressures and subdued sales of specific items. Employment rose at the slowest pace in the current 22-month period of job creation, while the latest upturn in buying levels was the least pronounced in two years."

Despite the slowdown in growth, Indian goods producers foresee an increase in output during 2026 relative to present levels, but overall sentiment has faded to its lowest in close to three-and-a-half years, the survey added.

Rishi Shah, partner and economic advisory services leader, Grant Thornton Bharat, said, “The latest PMI points to a measured deceleration rather than any loss of underlying strength in Indian manufacturing. Domestic demand remains resilient and cost pressures are unusually benign, providing an important buffer at a time when the global environment is becoming more uncertain. With export growth softening amid weaker external momentum, India’s growth impulse is increasingly inward-looking, which should help the sector navigate global volatility in the near term.”

The government’s decision to cut GST rates in September did not result in fall in indirect tax revenue, which in fact rose 6.1% year-on-year to ₹1.74 trillion in December. Income tax collections also rose, with net direct tax collections for FY26 touching ₹17.05 trillion , an 8% increase over the previous year (up to 17 December 2025).

‘In good shape’

Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said, “Even with growth momentum easing, India's manufacturing industry wrapped up 2025 in good shape. The sharp rise in new business intakes should keep companies busy as we head into the final fiscal quarter, and the lack of major inflationary pressures could continue to support demand.”

"We have seen a steady spell of softer growth in new export orders. In fact, the share of companies signalling higher international sales in December was about half of the average for 2025. The survey's anecdotal evidence has also pointed to a narrower range of export destinations, with goods mainly heading to Asia, Europe and the Middle East. With Indian manufacturers facing less intense cost pressures than elsewhere, many will be hoping that competitive pricing can help bring in new business from other regions in the new year,” she added.

While advertising, positive demand trends and new product releases were seen as tailwinds, some firms were concerned about competitive pressures and market uncertainty, the survey showed.