India manufacturing PMI rises in May as demand offsets rising cost pressures
Synopsis
India's manufacturing sector recorded its strongest growth in three months during May, supported by robust domestic demand and rising new orders, according to the latest HSBC PMI survey.
India's manufacturing sector expanded at its fastest pace in three months during May as strong domestic demand and rising new orders supported production growth, despite elevated input costs and softer business confidence. The latest HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 55.0 in May from 54.7 in April. A PMI reading above 50 indicates expansion in business activity.
Key highlights
- India manufacturing PMI rose to 55.0 in May from 54.7 in April
- Manufacturing activity expanded at the fastest pace in three months
- New orders grew at the quickest rate since February
- Input cost inflation remained among the strongest in nearly four years
- Business confidence fell to its lowest level since February
What happened?
The survey showed that manufacturing growth accelerated in May, driven by stronger demand conditions and an increase in new business.
New orders grew at the fastest pace since February, supported by civil engineering projects, competitive pricing and favourable market conditions.
Domestic demand remained the primary driver of growth, while export orders continued to expand but at a slower pace than in previous months.
Factory output also increased at its quickest rate in three months, led by gains in intermediate goods and capital goods production.
However, growth among consumer goods manufacturers eased during the month.
Why this matters
The latest PMI data suggests India's manufacturing sector remains resilient despite rising costs and global economic uncertainty.
Strong domestic demand continues to support industrial activity, helping offset slower export growth and persistent inflationary pressures.
The survey also highlights how manufacturers are adapting to higher costs by increasing purchasing activity and building inventories to manage potential supply disruptions.
Cost pressures remain elevated
Input price inflation remained a key challenge for manufacturers in May.
According to the survey, input cost inflation was the second-highest level recorded in nearly four years, excluding April's reading.
Higher spending on energy, fuel, raw materials and transportation contributed to rising production costs.
The survey also cited the conflict in the Middle East as a factor affecting input prices.
Among the sectors monitored, capital goods producers reported the strongest cost increases.
Selling prices rise at a slower pace
Although manufacturers continued to increase selling prices, output price inflation eased compared with April.
The survey found that competitive pressures prevented many firms from fully passing higher input costs on to customers.
As a result, selling price inflation remained below the rate of input cost growth.
Employment and purchasing activity
Manufacturing firms continued to add workers during May, although the pace of hiring slowed from April.
At the same time, purchasing activity increased sharply and reached its highest level in three months.
Many companies boosted buying activity to build precautionary inventories and contingency stocks amid ongoing cost and supply concerns.
Business confidence softens
Business optimism declined to its lowest level since February.
Despite the drop in confidence, manufacturers remained broadly positive about future growth prospects.
Survey respondents expressed confidence that cost pressures could ease in the coming months, supported by strong order pipelines and continued marketing efforts.
What happens next?
Manufacturers will continue monitoring input costs, supply chain conditions and demand trends in the months ahead.
The outlook for the sector will largely depend on whether cost pressures begin to moderate and whether strong domestic demand continues to support production growth.
Businesses also remain focused on managing inventories and maintaining order growth as economic conditions evolve.
FAQs
Q1: What was India's manufacturing PMI in May 2026?
The HSBC India Manufacturing PMI rose to 55.0 in May, up from 54.7 in April.
Q2: What does a PMI reading above 50 mean?
A reading above 50 indicates that business activity in the manufacturing sector is expanding.
Q3: What drove manufacturing growth in May?
Growth was supported by stronger domestic demand, rising new orders, civil engineering projects and increased factory output.
Q4: Were input costs still rising?
Yes. Input price inflation remained among the highest levels seen in nearly four years, driven by higher energy, fuel, material and transportation costs.
Q5: How did business confidence change?
Business confidence fell to its lowest level since February, although manufacturers remained optimistic about future growth prospects.
Follow Inspirepreneur Magazine for daily global business news
I write about markets, money, and the macro forces that move them. Passionate about turning complex economic trends into sharp, easy-to-understand stories. Off the clock, it’s hip hop, rock, reggae -- and a mix of cricket and basketball.
You Might Also Like
Australia’s Judo Capital Lifts Capital Position with $750 million SME Loan Deal
AMD’s AI Data Centre Business May Hit $1T By 2030
