India PMI drops to 57.4 in June as cost pressures, softer demand weigh on growth
Synopsis
India's private sector growth hit a three-month low in June, with the HSBC Flash PMI Composite falling to 57.4 from 59.3 in May. Cost pressures eased to a five-month low, but softening demand and geo-political tensions are beginning to show up in the data — raising questions about whether the recent growth streak has peaked.
Key Takeaways
HSBC Flash India PMI Composite fell to 57.4 in June from 59.3 in May — the weakest reading since March .
Manufacturing output growth softened as inventory-building slowed after several months of elevated activity.
Input cost inflation eased for the third consecutive month , hitting its lowest level since January .
Goods export growth was the weakest since March 2023 , though services export growth accelerated.
Business confidence remained positive, with companies expecting output to rise over the next 12 months .
India's private sector activity moderated in June 2025, with the HSBC Flash India PMI Composite Output Index slipping to a preliminary reading of 57.4 from 59.3 in May, according to the latest PMI data released on Tuesday. While the reading still signals a sharp pace of expansion, it marks the weakest growth since March, as geo-political tensions, rising input costs, and softening demand conditions combined to temper momentum.
Key Developments
The HSBC Flash India PMI Composite Output Index — a seasonally adjusted measure of month-on-month change in combined manufacturing and services output — fell by 1.9 points in June. Growth of manufacturing output softened as inventory-building lost steam following several months of elevated activity. Aggregate employment also expanded at a slower pace compared to recent months.
New orders continued to rise strongly overall, though the pace of demand growth eased, limiting how much companies could raise output levels. Export trends were mixed: services exports accelerated, while goods export growth hit its weakest point since March 2023.
What the Data Shows on Costs
Private sector companies continued to report month-on-month increases in expenses, driven by higher prices for chemicals, food, fuel, gas, metals, and utilities. Despite this, the overall rate of input cost inflation eased for the third successive month, reaching its lowest level since January. Cost pressures remained more pronounced in manufacturing than in services, according to the PMI data.
What Economists Said
Pranjul Bhandari, Chief India Economist at HSBC, noted that new export orders remained resilient and the order-to-inventory ratio ticked up, 'pointing at resilient manufacturing activity down the line.' She added that 'input costs across the private sector rose, but at the slowest pace in five months,' offering some relief on the inflation front.
Business Outlook and What Comes Next
Despite the moderation, companies remained confident of an increase in output over the coming 12 months relative to current levels, suggesting the underlying growth impulse is intact. Notably, this is the weakest composite PMI reading in three months, but a reading above 50 still denotes expansion — India's private sector has now remained in growth territory for an extended stretch. Markets and policymakers will watch whether geo-political headwinds and cost pressures persist into July, which could test the durability of India's services-led growth story.
Point of View
But the direction matters as much as the level — and the direction in June is down. The simultaneous softening in manufacturing output, employment, and new orders suggests the post-election demand surge that powered India's PMI into the high 50s is beginning to normalise. More concerning is the export picture: goods export growth at its weakest since March 2023 is a reminder that India's manufacturing competitiveness remains vulnerable to external shocks. The easing of input cost inflation is welcome, but if geo-political tensions persist, the cost relief could reverse quickly. The real test will be the final June PMI reading and the July flash number.
NationPress
23 Jun 2026
Frequently Asked Questions
What is the HSBC Flash India PMI Composite and what does the June reading mean?
The HSBC Flash India PMI Composite Output Index measures month-on-month change in the combined output of India's manufacturing and services sectors. A June reading of 57.4 — above the 50-point threshold — indicates continued expansion, but at the slowest pace since March.
Why did India's PMI fall in June 2025?
The PMI eased from 59.3 in May to 57.4 in June due to a combination of geo-political tensions, softening demand conditions, and cost pressures from higher chemical, food, fuel, gas, metal, and utility prices. Inventory-building also slowed after several months of elevated activity.
How did input costs behave in June?
Input cost inflation across India's private sector rose at the slowest pace in five months, easing for the third successive month to its lowest level since January. Cost pressures were more pronounced in manufacturing than in services.
What was the trend in Indian exports in June?
Export trends were mixed. Services export growth accelerated, while goods export growth was the weakest since March 2023, reflecting the impact of geo-political tensions and softer global demand for Indian manufactured products.
Does the June PMI signal a recession or slowdown in India?
No. A reading of 57.4 still signals a sharp rate of expansion — well above the 50-point mark that separates growth from contraction. Companies also remained confident of higher output over the next 12 months, though the pace of growth has moderated from recent highs.
