India’s manufacturing activity fell to a four-month low in September, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) slipping to 57.7 from 59.3 in August, according to a private survey released on October 1.
"The September headline index softened, but it remained well above the long-term average. New export orders increased at a faster rate in September, indicating demand outside of the US might be offsetting any decline in demand from the US as a result of tariffs," said Pranjul Bhandari, chief India economist, HSBC.
September is the first month since June that the PMI slipped below the 58 mark. Job creation was at its lowest level in four months. While input inflation rose at its lowest level since May, charge inflation was t a 12-year high, indicating pricing power for companies.
Economists expect manufacturing to pick up in the coming months, as goods and services tax (GST) rate rationalisation and the festival season spur consumer demand.
This was also evident in business optimism, which rose to a seven month high in September despite a dip in performance during the month.
"The overall level of confidence rose to a seven-month high. In addition to favourable demand conditions, investment in marketing and better customer relations, panellists identified GST cuts as a tailwind to growth," HSBC stated.
RBI stays steady, revises growth outlook upward
The Reserve Bank of India on October 1 kept the repo rate unchanged at 5.5 percent. It raised its GDP growth projection for FY26 to 6.8 percent from 6.5 percent, citing robust domestic demand. It lowered the inflation forecast to 2.6 percent from 3.1 percent.
The central bank expects the economy to expand 7 percent in Q2 FY26, down from the 7.8 percent in the previous quarter.
Global agencies remain cautious
International agencies are more guarded in their outlook. On September 30, the Asian Development Bank (ADB) trimmed India’s FY26 growth forecast to 6.5 percent from 6.7 percent, warning that higher tariffs could dampen exports and weigh on investment.
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