Manufacturing Mojo Cools: India’s Factory Growth Hits 3-Month Low in May

  • India’s manufacturing sector lost some steam in May 2025, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) dipping to 57.6, down from 58.2 in April—the lowest reading since February.

  • Despite the slowdown, the PMI remains well above the neutral 50-mark, signaling that factories are still expanding, just at a slower pace than before.

  • The moderation in growth was driven by softer, though still healthy, increases in new orders and output. Both metrics retreated to three-month lows but stayed above their long-term averages.

  • Robust demand—both domestic and international—continued to support sales, with export orders rising at one of the fastest rates in three years.

  • Manufacturers faced mounting challenges: rising input costs, fierce competition, and geopolitical tensions, especially the ongoing India-Pakistan conflict, which weighed on business sentiment and margins.

  • Inflationary pressures led many companies to hike selling prices, as costs for raw materials, freight, and labor climbed higher.

  • In a silver lining, employment in the sector surged at a record pace, with firms focusing on permanent hires. This hiring spree helped manufacturers manage workloads efficiently and ended a six-month streak of rising backlogs.

  • Supply chains showed improvement, with lead times shortening to the greatest extent in four months, aiding production flows.

  • Business confidence remains upbeat, underpinned by strong demand and successful marketing, even as the pace of expansion cools off.

  • Bottom line: India’s manufacturing engine is still running hot, but the tempo has eased as factories navigate a trickier environment of rising costs and global uncertainty.

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