July Manufacturing PMI hits 17-1/2-year high in a sign of robust growth momentum

India’s flash composite PMI remained healthy in July at 60.7.

India's manufacturing sector continued to power ahead in July 2025, with the HSBC Flash Manufacturing Purchasing Managers' Index (PMI) rising to 59.2, its highest reading in nearly 17-1/2 years.

This PMI surge marks a significant acceleration from 58.4 reading in June, and indicates a robust improvement in factory operating conditions, supported by a surge in both domestic and international demand.

The Composite PMI Output Index – which combines manufacturing and services activity – stood at 60.7 in July, just below June’s 61.0, clocking the fastest upturn recorded in over a year. The buoyancy in activity was fuelled by higher order intakes, export gains, investments in technology, and capacity expansion across both sectors.

“India’s flash composite PMI remained healthy in July at 60.7. The strong performance was bolstered by growth in total sales, export orders, and output levels. Indian manufacturers led the way, recording faster rates of expansion than services for all of the three metrics,” said Pranjul Bhandari, Chief India Economist at HSBC.

Strong Demand and Output Gains

According to the PMI survey, operating conditions across India’s private sector have improved sharply in July. Total sales expanded at the fastest pace in a year, with new export orders rising significantly – driven by demand from Asia, Europe and the United States. Manufacturing outpaced services in terms of output growth, reaching its strongest pace of growth since April 2024, while services activity remained strong despite slight moderation.

The HSBC Flash India Manufacturing PMI Output Index increased to 62.5 in July from 62.1 in June, while the Services PMI Business Activity Index softened to 59.8, down from 60.4. Notably, the headline Composite Output Index remained well above its long-term average of 54.8, suggesting continued momentum in India’s economic activity.

Price Pressures Mount

Despite the upbeat production and sales figures, inflationary pressures showed signs of intensifying. Monitored firms cited price increases in aluminium, cotton, rubber, steel, transportation, and foodstuffs including vegetables, eggs, and meat. Consequently, companies in both manufacturing and services passed on these costs to consumers by raising output charges.

“...inflationary pressures continue to heat up as both input costs and output charges rose in July. Finally, business confidence fell to its lowest mark since March 2023, while employment growth moderated to its weakest pace in 15 months,” Bhandari added.

While firms remained optimistic about future output growth, concerns about intensifying competition and persistent price pressures weighed on overall sentiment, which dipped to its lowest level in nearly two-and-a-half years.

Labour Market Slows

Employment continued to rise in July, though at a slower pace, marking the weakest job creation rate in 15 months. The slowdown was particularly pronounced in the services sector, where the seasonally adjusted index fell by nearly four points. In contrast, the manufacturing sector saw a firmer uptick in employment.

Outstanding business volumes rose at their fastest rate in nearly five years, with more acute backlogs in services than in manufacturing, suggesting rising capacity constraints amid strong demand.

Inventory Build-Up

Within the manufacturing sector, firms reported a sharp increase in purchasing activity and a substantial accumulation of input inventories, backed by improved supplier delivery times. However, stocks of finished goods continued to decline as companies relied on existing inventories to meet rising order volumes.

Although July’s PMI data points to a resilient and expanding economy, the moderation in business sentiment and job creation underscores emerging risks that firms are beginning to factor in – particularly inflation and competitive pressures.