India’s manufacturing sector showed signs of cooling in December, according to a survey by S&P Global, but remained in expansion territory. The purchasing managers’ index (PMI) slipped to 55 from 56.6 in November as production growth eased to a 38-month low amid fading festive demand and weaker global orders.
India manufacturing PMI eases but remains in expansion
The survey, based on responses from purchasing executives at 400 companies, confirmed that a PMI reading above 50 still denotes expansion. S&P Global said the latest reading signalled the weakest improvement in the health of the sector in two years, reflecting softer output and a cooling pace of job creation.
Employment in the sector rose in December, but at the slowest pace recorded in the current 22-month period of growth that began in March 2024. Manufacturers cited a general lack of pressure on operating capacities, which limited recruitment despite continued demand for labour in some segments.
Input cost inflation increased in December, driven by higher prices for bamboo, chemicals, glass, leather and packaging. The rise in input costs was modest and little changed from November, however, and remained below the long-run average. Output prices rose at the softest rate seen in nine months.
Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, noted that even with growth momentum easing, India’s manufacturing industry finished 2025 in good shape. She pointed to a sharp rise in new business intakes that should keep companies busy as the economy moves into the final fiscal quarter, and the absence of major inflationary pressures that could support demand.
Export demand was a weaker element of the December survey. The rate of growth in new export orders softened steadily and the share of firms reporting higher international sales in December was about half of the 2025 average. Anecdotal evidence from the survey suggested a narrowing of export destinations, with goods mainly heading to Asia, Europe and the Middle East.
Firms remained cautiously optimistic about output in 2026, expecting production to rise from present levels. Nonetheless, overall sentiment cooled to its lowest point in close to three and a half years. Companies cited advertising, positive domestic demand trends and new product releases as support for the outlook, while concerns centred on competitive pressures and market uncertainty.
Manufacturing accounts for roughly 16 per cent of India’s gross domestic product and is widely regarded as a significant job multiplier. With cost pressures milder than in some other regions, many producers are hoping that competitive pricing can help attract orders from abroad in the coming months.
While the December data underlined a period of softer momentum, analysts emphasised the constructive aspects of the picture: activity remained in expansion, price pressures were contained, and new business gains offered a path to renewed momentum if global demand recovers.
Key Takeaways:
- India manufacturing PMI eased to 55 in December from 56.6 in November, signalling slower expansion.
- Production growth fell to a 38-month low while job creation rose at its slowest pace in a 22-month run.
- Input cost inflation rose modestly but remained below long-run averages, helping competitive pricing.
- New export orders softened, though analysts expect demand and new business to support activity into 2026.
