India's manufacturing sector continued to show robust performance in July 2025, with activity climbing to its highest level in 16 months, according to data released by HSBC. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 59.1 in July, up from 58.4 in June, signaling the strongest improvement in sectoral health since March 2024.
The report attributed this uptick primarily to a notable increase in new orders, which saw their sharpest growth in nearly five years. This surge was largely fueled by strong domestic demand and effective marketing strategies adopted by firms. As a result, production activity also picked up pace, touching a 15-month high. Intermediate goods producers led this momentum, while other segments expanded at a relatively slower rate.
Inventory Rebuild, But Slower Job Growth
Manufacturers ramped up their input purchases to rebuild inventories, although the pace of buying was marginally below June levels. It still marked the second-fastest rate in over a year. Improved supplier performance supported this trend, leading to the strongest growth in stocks of purchases in 15 months. However, finished goods inventories declined, as firms continued to fulfill demand from existing stock.
On the employment front, job creation lost momentum. Although companies continued to add staff in July, the pace of hiring was the weakest seen since November 2024. “Among the main headwinds to growth, survey members listed competition and inflation concerns,” the report noted.
Cost Pressures Rise, Confidence Falls
While input costs rose more sharply during the month, they remained modest in comparison to historical averages. Companies responded by raising selling prices, with the rate of price hikes exceeding the long-run trend—indicating some pass-through of higher costs to consumers.
Despite strong domestic demand, export order growth slowed in July compared to the previous month. Nevertheless, the pace of international sales remained among the highest seen in over 14 years.
Business sentiment, however, declined notably. According to the survey, business confidence fell to its lowest point in three years, suggesting that firms remain cautious amid concerns around inflationary pressures and increasing market competition.
The July PMI reading reinforces the manufacturing sector’s resilience, but also highlights challenges that may temper growth momentum in the coming months.