India’s manufacturing sector strengthened in May, with the HSBC India Manufacturing PMI rising to 55.0 from 54.7 in April and above the flash estimate of 54.3. This marked the strongest improvement in manufacturing conditions in three months.
New orders and production grew at their fastest pace since February, supported mainly by strong domestic demand, infrastructure projects, and new business wins. Export orders continued to increase but at a slower pace than in previous months.
Manufacturers increased purchases of raw materials at the fastest rate in three months and built up inventories as a precaution amid uncertainty linked to the ongoing Middle East conflict. Stocks of finished goods rose for a second consecutive month and recorded the fastest accumulation in 11 years.
Input costs remained elevated, with companies reporting higher spending on energy, fuel, materials, and transportation. Input price inflation was the second-highest in 45 months, exceeded only by April 2026 levels.
Factory selling prices continued to rise, but at a slower pace than input costs and below the average seen over the past year. Only 8% of firms said they passed higher costs on to customers, while many held back due to competitive pressures.
Employment increased again in May as firms responded to higher production needs, while business confidence remained positive. Companies expect cost pressures to ease later in the year and remain optimistic due to strong order pipelines and advertising efforts.
HSBC Chief India Economist Pranjul Bhandari said the data suggests precautionary stockpiling continued in May because of Middle East tensions. She noted that output, purchasing activity, and inventories rose, while slower output price inflation compared with input cost growth could put pressure on manufacturers’ profit margins.
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