India Flash PMI Hits 56.5, Highest in Four Months

NEW DELHI — India’s composite business activity expanded at its fastest pace in four months in September, with the flash Purchasing Managers’ Index (PMI) rising to 56.5 from 55.9 in August, data released by S&P Global on Wednesday showed. The reading, well above the 50.0 threshold that separates growth from contraction, indicates a robust acceleration in the pace of economic expansion across both manufacturing and services sectors.

Manufacturing Output and Orders Surge

The manufacturing sector was the primary driver of the overall improvement. The flash manufacturing PMI climbed to 57.2 in September, up from 56.1 in the previous month. This marked the strongest expansion in industrial output since May 2026. According to the survey, the increase was attributed to a significant rise in new orders, which grew at the fastest rate in four months. Companies reported that demand for goods had strengthened, particularly in the automotive and electronics segments, leading to increased production schedules.

Input price inflation in the manufacturing sector also accelerated, with the index rising to 62.4 from 60.8 in August. This was the highest level of cost pressure in over a year, driven by increased costs of raw materials such as steel, aluminum, and energy. Despite the rise in input costs, output price inflation moderated slightly, suggesting that manufacturers were absorbing some of the cost increases rather than passing them on fully to consumers.

Services Sector Maintains Momentum

The services sector also contributed to the overall growth, with the flash services PMI rising to 56.1 from 55.6 in August. Business activity in the services sector expanded for the 14th consecutive month. The growth was broad-based, with improvements seen in professional services, transportation, and retail. New business volumes in the services sector grew at a solid pace, supported by increased consumer spending and corporate investment.

Employment trends remained positive across both sectors. The composite employment index rose to 52.3, indicating a continued, albeit gradual, increase in hiring. Manufacturing employment grew for the third consecutive month, while services employment expanded for the fifth month in a row. However, the pace of hiring remained moderate, with many firms citing labor shortages and wage pressures as constraints on faster recruitment.

Business confidence improved in September, with the composite business confidence index rising to 58.2 from 57.5 in August. This was the highest level of confidence in three months. Respondents cited improved demand conditions and stable macroeconomic policies as key factors boosting their outlook. However, concerns over global economic slowdown and geopolitical tensions remained prevalent, with many firms indicating caution in their long-term investment plans.

Economic Context and Implications

The strong PMI data provides further evidence of the resilience of the Indian economy in the face of global headwinds. The improvement in business activity is expected to support GDP growth in the second quarter of fiscal year 2026-27. The Reserve Bank of India (RBI) has maintained a cautious stance on monetary policy, with the repo rate held at 6.5% since early 2026. The strong PMI data may influence the RBI’s assessment of inflationary pressures, particularly given the rise in input costs.

Analysts noted that the data suggests a balanced recovery, with both manufacturing and services contributing to growth. However, the rise in input price inflation could pose challenges for corporate margins, particularly for small and medium enterprises (SMEs) with limited pricing power. The government’s focus on infrastructure investment and manufacturing promotion is expected to provide additional support to the manufacturing sector in the coming months.

The flash PMI is based on surveys of over 400 companies across the manufacturing and services sectors. The data is released on the 23rd of each month, providing an early indication of economic performance. The final PMI data for September is expected to be released in early October, which may provide further insights into the sustainability of the current growth trend.