India Manufacturing PMI Slows in June as Demand Weakens Despite Lower Cost Pressures

India’s manufacturing sector continued to expand in June, but growth slowed to its second-weakest pace in four years as softer domestic and overseas demand weighed on production, hiring, and business confidence, according to the latest HSBC India Manufacturing Purchasing Managers’ Index (PMI) compiled by S&P Global.

The headline HSBC India Manufacturing PMI declined to 54.2 in June from 55.0 in May, slightly below the preliminary estimate of 54.5. Although the reading marked the second-lowest level since mid-2022, it remained comfortably above the 50-point threshold that separates expansion from contraction, indicating that the sector is still growing. The June figure also remained broadly in line with the survey’s long-term average.

Demand conditions weakened during the month, with new orders increasing at their second-slowest pace since June 2022 after reaching a three-month high in May. Export demand also softened considerably, with international orders recording their weakest growth in 39 months. Survey participants pointed to subdued demand from European markets as a key factor behind the slowdown in overseas sales.

The softer flow of new business translated into slower manufacturing output growth. Factory production expanded at its second-slowest pace since mid-2022, with weaker activity in the capital goods segment contributing to the moderation.

At the same time, easing inflationary pressures offered some relief for manufacturers. Input cost inflation eased to a four-month low, although companies continued to report higher prices for chemicals, metals, petroleum products, and plastics. Reduced cost pressures also limited the need for firms to pass on higher expenses to customers. Selling price inflation slowed to its weakest pace in three months, while approximately 93% of surveyed manufacturers left their prices unchanged from May.

The cooling demand environment also affected hiring activity. Employment growth eased to its weakest level of 2026, with the overwhelming majority of companies—around 97%—choosing to keep workforce numbers unchanged. Many businesses reported that existing staffing levels were sufficient to handle current workloads, reducing the need for additional recruitment.

Business sentiment also weakened during June. Manufacturers expressed greater caution about future growth prospects, with confidence slipping to a five-month low amid concerns over softer demand and broader market conditions.

Despite the slowdown, the latest PMI data suggests India’s manufacturing industry remains on a growth path. However, weaker domestic and export demand, slower production growth, cautious hiring, and fading business optimism indicate the sector faces mounting challenges heading into the second half of the year, even as easing input costs provide some support for manufacturers.