India's manufacturing sector witnessed robust growth in July, reaching a 16-month high with the Purchasing Managers’ Index (PMI) climbing to 59.1 from 58.4 in June, according to a monthly survey released on August 1, 2025. The HSBC India Manufacturing PMI, a seasonally adjusted indicator compiled by S&P Global, signalled the strongest improvement in the sector since March 2024, driven by a sharp rise in new orders and output.

A PMI score above 50 reflects expansion, while below 50 indicates contraction. HSBC’s Chief India Economist, Pranjul Bhandari, noted that July's reading highlighted substantial gains in new business, with overall sales growing at the fastest rate in nearly five years. Production also expanded significantly, reaching a 15-month high and exceeding historical averages.

Despite this upbeat performance, business optimism declined. Confidence among manufacturers regarding future output fell to its lowest level in three years, largely due to competitive pressures and inflationary concerns. Input and output prices remained high, with raw materials like aluminium, leather, rubber, and steel becoming more expensive.

Hiring activity continued, but at the slowest pace in eight months. Most surveyed firms (93%) stated that their current workforce was adequate to meet existing demand. Backlogs rose only slightly, suggesting that employment levels were largely sufficient. Bhandari added that amid weaker confidence, staffing increases were minimal—the slowest since November 2024.

Manufacturers also passed on increased input costs to customers due to strong demand, leading to higher selling prices. While demand conditions remained favourable, inflation and market competition emerged as key challenges to sustained momentum in the sector. The PMI survey is based on feedback from approximately 400 purchasing managers across the country.