India Business Growth
India Private-Sector Activity Accelerates in September as Manufacturing Leads Strong Growth
Anonymous
Key Points
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Manufacturers’ sales growth reached a seven-month high and outpaced the increase recorded by services companies, indicating that the recovery was particularly strong among goods producers.
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Service providers reported stronger demand for property, transport services and travel bookings, as well as increased client interest in software and digital solutions. Manufacturers cited stronger demand for aluminium products, electronics, food, pharmaceuticals and new models.
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Employment rose solidly in September, with both manufacturers and service providers adding staff at broadly similar rates amid sustained growth in output and new orders.
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The September manufacturing reading represented the strongest improvement in operating conditions in seven months, following a five-year low in manufacturing growth in August.
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HSBC chief India economist Pranjul Bhandari said that output and new domestic orders rose at faster rates, while renewed Middle East tensions prompted companies to build buffers; the finished-goods inventory index reached an 11-and-a-half-year high.
India's private-sector economy surged in September, with the HSBC Flash Composite PMI jumping to 56.5 from 54.3 in August — the strongest expansion since June. Hindustan Times reported that output and new domestic orders rose at faster rates, powered by a sharp rebound in manufacturing and solid gains in services. The surge marks a decisive recovery after August's five-year low in factory growth.
Manufacturing PMI climbed to 55.7 from 52.8, while the manufacturing output index shot up to 58.2 from 54.8. Services activity increased to 55.8 from 54.1. However, new export orders grew at their weakest pace in nearly three years, and companies rushed to build inventory buffers to 11.5-year highs amid renewed Middle East tensions.
Manufacturing Rebounds to a Seven-Month High
Manufacturers led September's recovery with their strongest output growth in seven months. Sales climbed across aluminium, electronics, food, and pharmaceuticals. Hindustan Times noted that HSBC Chief India Economist Pranjul Bhandari said manufacturers' output rose at faster rates than service providers, signaling that goods producers drove the rebound harder than the broader economy.
The September reading represented a dramatic turnaround from August's five-year low in manufacturing growth. Stronger domestic demand and robust new orders supported the jump. Companies also added staff at solid rates to keep pace with rising output. The recovery suggests factories have shaken off summer weakness and gained momentum.
Services Gain Ground in Property and Software
Services activity accelerated in September, driven by stronger demand for property, transport, travel bookings, and digital solutions. Software and IT companies reported increased client interest, while hospitality and logistics firms benefited from rising domestic travel. The 55.8 business activity index reflects broad-based strength across the services sector.
Both manufacturers and service providers added workers at comparable rates, suggesting employment growth remained solid. Companies hired to meet sustained increases in both domestic orders and total output. This dual hiring pattern across sectors points to genuine economic momentum rather than isolated strength.
Export Orders Weaken as Firms Stockpile Supplies
New export-order growth moderated to its weakest pace in nearly three years, a significant drag on otherwise strong momentum. Companies cited global economic uncertainty and geopolitical tensions as headwinds. Meanwhile, renewed Middle East instability prompted firms to accelerate purchasing and build inventory buffers against supply shocks.
The finished-goods inventory index reached an 11.5-year high, signaling aggressive stockpiling. Hindustan Times quoted Pranjul Bhandari saying firms built buffers to manage uncertainties from Middle East tensions. The rapid inventory buildup reflects defensive behavior even as domestic demand surges, suggesting companies remain cautious about global conditions ahead.
Input Costs Ease, Easing Pressure on Margins
Input cost inflation across the private sector eased to its lowest level since January 2026, providing relief for manufacturers and service providers. Softer service-sector costs drove much of the decline. Lower input pressures create breathing room for companies to maintain margins without aggressive price hikes. This easing may also give the Reserve Bank of India more flexibility on interest-rate decisions.
Factory-output prices showed signs of stabilization, with manufacturers reporting they could better manage profit margins without radical pricing actions. The combination of cooling input costs and solid domestic demand suggests India's private sector has found a sustainable growth rhythm for now.
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