India's manufacturing sector posted its strongest performance in seven months in September 2026, with the seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) climbing to 55.1 from 52.8 in August, according to data released by HSBC India on 1 October. The reading marks the sharpest improvement in the health of the sector since February, driven by a broad-based surge in new orders and factory output.

What drove the September surge

Firmer demand across electronics, food, pharmaceuticals, and textiles underpinned a sharp rise in new orders, while total sales expanded at the fastest pace since February. Factory output grew at its quickest rate in four months, reflecting the improved demand environment both at home and abroad.

Notably, intermediate goods recorded the strongest growth in new orders and output during the month. Capital goods, however, saw only modest increases — a detail worth watching for signs of a broader investment cycle pickup.

Export demand picks up across key markets

New export orders also accelerated in September, with Indian manufacturers reporting stronger demand from Brazil, Europe, the UAE, and the US. This points to a broadening of India's manufacturing footprint beyond domestic consumption — a structural positive if sustained.

'India's factory sector ended the quarter on a firmer footing. The PMI rose to 55.1 in September, up from 52.8, as stronger domestic and overseas demand lifted sales and production,' said Pranjul Bhandari, Chief India Economist at HSBC.

Hiring resumes at fastest pace since May

Employment growth resumed in September, with the pace of job creation reaching its strongest level since May. Bhandari noted that 'hiring resumed at its fastest pace since May, and manufacturers became more optimistic about the months ahead.' Manufacturers also stepped up purchases of raw materials and built up inventories, with stocks of purchases rising at the fastest pace in seven months — well above the long-run average.

Business confidence also strengthened, with overall optimism about future output climbing to a four-month high.

Input cost pressures remain a watchpoint

The upturn was not without headwinds. Manufacturers reported faster increases in input costs during September, primarily driven by higher prices of electronic components, pharmaceutical items, and steel. Sustained cost pressures could weigh on margins if demand growth moderates or firms struggle to pass on higher prices.

Quarter-two context and outlook

Despite the strong September reading, the average PMI for the second fiscal quarter (July–September) stood at 53.8 — solid but below the single-month peak, reflecting a softer August. With business confidence at a four-month high and export pipelines expanding, the momentum heading into the third quarter appears broadly constructive, though cost inflation and the trajectory of global demand remain key risks to watch.