India’s private sector activity expanded at a slower pace in October, marking a five-month low, as softer demand and higher output prices weighed on business sentiment, according to the HSBC Flash India Composite Purchasing Managers’ Index (PMI) compiled by S&P Global.
The composite PMI fell to 59.9 in October from 61.0 in September, missing a Reuters poll forecast of 61.2. While the reading remains well above the 50-mark separating expansion from contraction, it reflects the slowest pace of growth since May.
Services cool down, manufacturing rebounds
The moderation in activity was largely driven by a slowdown in services, where the business activity index dropped to 58.8 from 60.9 in September. In contrast, manufacturing activity picked up slightly, with the PMI rising to 58.4 from 57.7, signaling a modest recovery after hitting a four-month low last month.
The new orders sub-index showed continued expansion but at its weakest pace since May, reflecting a loss of momentum in services. Meanwhile, international demand softened to a seven-month low, mainly due to reduced growth in manufacturing exports.
U.S. tariffs weigh on export performance
The slowdown in exports comes amid steep U.S. tariffs on Indian goods, with President Donald Trump reiterating that the tariffs will remain high unless India halts Russian oil imports. According to the Reserve Bank of India’s (RBI) latest monthly bulletin, merchandise trade remains resilient overall but exports to the U.S. declined sharply in September as the higher tariffs took effect.
Inflation pressure eases but prices stay elevated
Input cost pressures eased across both manufacturing and services, aided by the September GST rate cuts. However, firms largely passed on higher operational costs to consumers, raising selling prices.
Business optimism softens
Looking ahead, business optimism for the next 12 months waned, with firms citing rising competition, uncertain market conditions, and weakening demand as key concerns.
Despite the pullback, economists note that India’s private sector continues to outperform major global peers, supported by strong domestic fundamentals and manufacturing resilience amid global headwinds.
