International sales were mixed, with manufacturing exports rising more quickly than service sector exports
The HSBC Flash India Composite Output Index data for September indicated that India’s private sector output slowed slightly from the near two-decade highs reached in August. The index came in at 61.9, down from 63.2 in August.
New business growth eased, leading to slower increases in private sector output and employment, while international sales also rose at a weaker pace, the report stated. Input cost inflation cooled, keeping price increases moderate, yet business confidence strengthened by the end of the second fiscal quarter.
Factory output outpaced services growth, but both sectors saw slower increases compared with the previous month.
Manufacturing Output Softens Due To US Export Tariffs
The HSBC Flash India Manufacturing PMI slipped to 58.5 in September from 59.3 in August. Despite the moderation, the reading remained well above the neutral 50 mark, indicating robust expansion in operating conditions. New business inflows continued to grow strongly, although the pace of order intake softened from the previous month.
International sales were mixed, with manufacturing exports rising more quickly than service sector exports, which recorded the joint-weakest growth since March 2025. Overall, aggregate new export orders rose at the softest pace in six months.
“The manufacturing PMI moderated, but its pace of expansion remains healthy. The imposition of the 50% tariff rate by the US on India likely resulted in a slower rise in new export orders over Aug-Sep,” said Pranjul Bhandari, Chief India Economist at HSBC.
“This comes on the back of strong frontloading of exports to the US since early-2025. Meanwhile, new domestic orders rose for the last two months, likely on the back of announcements of lower GST rates. All said, the impact of higher tariffs have been somewhat offset by lower tax rates in the data so far.”
Employment And Cost Analysis
Employment in the private sector continued to expand, but at a slower pace. Both manufacturing and service firms reported sufficient labour for current requirements, with only around 3% – 5% of companies indicating job creation. Similarly, outstanding business volumes rose only marginally, pointing to a lack of pressure on operating capacities.
Cost pressures remained more pronounced in services, driven by wage increases and higher prices for raw materials such as cotton, electronics components, oil, steel, and wood. Manufacturing firms, however, increased selling prices at the fastest rate in over 12 years, offsetting some of the softer cost pressures in services.
GST Rejig Boost Business Confidence
Meanwhile, business confidence strengthened to a seven-month high, supported by expectations of capacity expansion, competitive pricing, strong demand, efficiency gains, marketing efforts, and potential benefits from recent GST rate cuts.
Key September PMIs
· Composite Output Index: 61.9 vs 63.2 in August
· Services Business Activity Index: 61.6 vs 62.9 in August
· Manufacturing Output Index: 62.7 vs 63.7 in August
· Manufacturing PMI: 58.5 vs 59.3 in August
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