India's Manufacturing PMI Drops To 55.0 In December, Hits 38-Month Low
India's manufacturing sector showed signs of cooling as the PMI dropped to 55.0 in December, marking a 38-month low despite remaining in expansion territory. The slowdown was broad-based, affecting new orders, production, and employment growth, while export performance weakened significantly with international demand concentrated in fewer markets.
*this image is generated using AI for illustrative purposes only.
India's manufacturing sector expanded at a slower pace in December, with the HSBC Manufacturing Purchasing Managers' Index (PMI) declining to 55.0 from 56.6 in November. This reading marked a 38-month low, representing the weakest expansion since October 2021, according to S&P Global data.
Despite the decline, the index remained comfortably above the 50 threshold that separates expansion from contraction, indicating continued growth in factory activity.
Key Performance Indicators
The latest PMI data reveals a broad-based moderation across manufacturing indicators:
| Metric | December | November | Performance |
|---|---|---|---|
| HSBC Manufacturing PMI | 55.0 | 56.6 | 38-month low |
| New Business Growth | Slowest since Dec 2023 | - | Sharp deceleration |
| Factory Production | Weakest since Oct 2022 | - | Significant slowdown |
| Employment Growth | Weakest since Mar 2024 | - | Limited expansion |
New business continued to register strong growth in December, although the rate was the slowest since December 2023. Factory production also increased, but at its weakest pace since October 2022. The softer increase in orders prompted firms to be more cautious in purchasing raw materials, even though total buying still rose.
Export Performance and Regional Demand
Growth in export orders lost momentum during the month, with international demand rising at the slowest rate in 14 months. Among companies reporting growth, stronger demand from Asia, Europe and the Middle East was cited as the main factor.
Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, highlighted the concerning export trend: "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 the year."
She noted that export growth was concentrated in fewer markets, mainly Asia, Europe and the Middle East, adding: "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."
Employment and Capacity Utilization
With reduced pressure on production capacity, firms added only a limited number of workers in December. Employment growth was the weakest since the current expansion phase began in March 2024. Outstanding business rose slightly, indicating companies were broadly able to handle workloads with existing capacity.
Business Sentiment and Outlook
Manufacturers remain optimistic about output growth, though confidence has fallen to its lowest point in nearly three-and-a-half years. While advertising, stable demand and new product launches are seen as supportive, some companies remain concerned about intense competition and market uncertainty.
De Lima noted that despite the moderation, India's manufacturing sector closed the year on firm ground: "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."
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