After a strong start to 2025, India's manufacturing sector lost some momentum in February as new orders and production slowed, bringing the Purchasing Managers’ Index (PMI) down to a 14-month low of 56.3, according to a private survey released on Monday. The PMI had stood at 57.7 in January, as per data from HSBC and compiled by S&P Global.

Despite this decline, the survey highlighted that output and sales growth remained strong in the broader context of the survey’s 20-year history. All three monitored sub-sectors—consumer, intermediate, and investment goods—continued to see improvements in business conditions. “Strong domestic and international demand encouraged firms to ramp up purchasing and expand their workforce at above-trend rates. However, this demand also kept selling price inflation high, despite some easing in cost pressures,” the survey noted.

A PMI above 50 indicates expansion in manufacturing activity, while a reading below 50 signals contraction. Pranjul Bhandari, HSBC’s chief India economist, remarked that while February’s PMI was slightly lower than January’s, it remained well within expansion territory. She pointed out that strong global demand continued to fuel growth, leading to increased purchasing and hiring in the sector.

“Business confidence remained high, with nearly one-third of survey participants expecting greater output volumes in the coming year. Though output growth was at its slowest since December 2023, the overall momentum in India’s manufacturing sector remained positive,” she added.

February also marked the 44th consecutive month of growth in new business inflows, as firms cited strong client demand and competitive pricing strategies.

New export orders also saw a sharp rise, though the pace of growth was slightly lower than January’s near 14-year high. This sustained demand led to continued workforce expansion, extending the period of employment growth to a full year. “The rate of job creation in February was the second-highest in the survey’s history, just behind January’s record. One in ten firms reported increased hiring, while only 1% of companies reduced staff,” the report noted.

On the cost front, Indian manufacturers faced rising input prices, particularly for materials like bamboo, leather, rubber, and telecom services. However, the survey offered some relief, noting that the overall inflation rate eased for the third straight month, reaching its lowest level in a year. While selling prices remained above long-term averages, firms were able to pass on higher labor costs to customers, supported by strong demand.

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