India’s private sector growth cools in September as US tariffs weigh on exports

New Delhi: India’s private sector growth in September has cooled down from its recent high in August, signalling a modest slowdown, according to HSBC’s flash Purchasing Managers’ Index survey released Tuesday.

A softer expansion in new business intake was accompanied by slower increases in private sector output and employment, with international sales growth also slowing due to the US’s 50% tariff on Indian goods, the survey said.

The HSBC Flash India Composite Output Index, which tracks month-on-month changes in combined output across manufacturing and services, fell to 61.9 in September from 63.2 in August.

“Price trends were more benign as cooler input cost inflation allowed for selling charges to be lifted to a lesser degree. Nevertheless, business confidence strengthened at the end of the second fiscal quarter,” the survey said.

“Growth of factory production outpaced that seen for services activity, though rates of increase moderated in each case,” it added.

The final PMI data for September will be released early next month.

The HSBC Flash India Manufacturing PMI—a weighted average of the new orders, output, employment, suppliers’ delivery times, and stocks of purchases indices—slipped to 58.5 in September from August’s final reading of 59.3.

“The improvement in operating conditions signalled by the PMI was nevertheless robust by historical standards, with the respective index well above both the neutral mark of 50.0 and its long-run average of 54.2,” the survey said.

“September data showed another substantial increase in new business placed with Indian private sector companies. The pace of expansion was sharp and well above trend but receded from August,” it added.

The HSBC Flash India Manufacturing PMI Output Index stood at 62.7 in September, down from August’s final reading of 63.7.

The HSBC Flash India Services PMI Business Activity Index stood at 61.6 in September, falling from August’s final reading of 62.9.

“The manufacturing PMI moderated, but its pace of expansion remains healthy. The imposition of the 50% tariff rate by the US on India likely resulted in a slower rise in new export orders over August-September,” said Pranjul Bhandari, chief India economist at HSBC.

“This comes on the back of strong frontloading of exports to the US since early-2025. Meanwhile, new domestic orders rose for the last two months, likely on the back of announcements of lower GST rates. All said, the impact of higher tariffs has been somewhat offset by lower tax rates in the data so far,” she added.

Exports slowest in six months

The flash PMI data compiled by S&P Global is based on responses from around 400 manufacturers and 400 service providers.

In September, the surveyed firms reported that international sales trends diverged across the manufacturing and service economies, with growth slowing in the latter to the joint-weakest since March, contrasting with a quicker upturn at goods producers.

Subsequently, aggregate new export order volumes increased at the softest pace in six months.

“Although private sector workforces continued to increase at the end of the second fiscal quarter, the rate of expansion receded from August and was moderate overall. Slower rates of increase were noted across both the manufacturing and service sectors,” the survey said.

“In fact, the proportion of companies indicating job creation in the aforementioned segments stood at around 3% and 5% respectively. The vast majority of survey participants reported having sufficient labour for current requirements,” it added.

India’s drive to become a $10 trillion economy in a couple of decades is increasingly anchored in manufacturing, with semiconductors, electronics, electric vehicles, renewables, and defence emerging as key growth engines.

To underpin this ambition, the government has stepped up capital investment in infrastructure, industrial capacity, and job creation.

The latest PMI survey showed that cost pressures remained more pronounced in India’s service economy in September, though overall expenses across the private sector as a whole saw a smaller increase during the month.

“Factory gate charges rose to the greatest extent in over 12-and-a-half years, but a substantial slowdown in the service economy pulled the aggregate rate of inflation lower,” the survey said.

“Private sector firms’ assessments of future output were strongly positive in September, with the overall level of confidence rising to a seven-month high,” it added.