Flash PMI eases to 58.5 in September on weak export orders

India's Flash PMI slowed in September as weak export orders hurt manufacturing while domestic demand ahead of festivals offered support, easing price pressures and lifting confidence

The HSBC India Flash Manufacturing Purchasing Managers’ Index (PMI) eased to 58.5 in September from 59.3 in the preceding month, as new export orders rose at the weakest pace in six months under the impact of 50 per cent tariff on India by the US administration. Domestic orders showed resilience ahead of the festive season.

 

“We expect this trend to last till Diwali, giving an overall boost to growth. Things may change post Diwali, with the drag from the 50 per cent tariff from the US overtaking the boost from tax cuts,” HSBC said.    

 

HSBC India Services PMI in September also dropped to 61.6 from 62.9 in August. Composite PMI Output eased to 61.9, down from the multi-year high of 63.2 in August.

 

A reading above 50 in PMI indicates expansion, while a reading below 50 signals contraction.

 

"The manufacturing PMI moderated, but its pace of expansion remains healthy. The imposition of 50 per cent tariff rate by the US on India likely resulted in a slower rise in new export orders over August-September. This comes on the back of strong frontloading of exports to the US since early-2025”, Pranjul Bhandari, chief India economist at HSBC, said. 

 

Bhandari said new domestic orders have risen for the past two months, likely due to the lower Goods and Services Tax (GST) rates announcement, adding that the offsetting effect of tax cuts has softened the blow from tariffs. 

 

The report added that price pressures had eased in September as input cost inflation moderated. While manufacturers reported higher costs for cotton, steel, and oil, cost pressures remained more pronounced in services. The factory-gate prices rose to the greatest extent in over 12 years, but the service slowdown pulled the aggregate inflation down.

 

On employment growth, the report said the private sector had cooled, with only 3 per cent of the manufacturing firms and 5 per cent of the service providers reporting job creation. Most indicated sufficient staff for current business needs.

 

Business confidence rose to a seven-month high, supported by expectations of capacity expansion, competitive pricing, and efficiency gains despite some companies citing competitive pressures, the report added.

 

HSBC economists said the latest PMI data gives the Reserve Bank of India room to hold policy rates at its October 1 meeting. Inflation, they added, was tracking at 1.5 per cent in September, down from 2.1 per cent in August, with GST cuts and imported disinflation from China expected to keep price pressures subdued.