New Delhi, October 1, 2026 — India's manufacturing sector recorded a sharp improvement in September, with factory activity reaching its highest level in seven months as stronger domestic and international demand boosted new orders, production and employment.
The HSBC India Manufacturing Purchasing Managers' Index, compiled by S&P Global, climbed to 55.1 in September from 52.8 in August. The latest reading marked the strongest expansion since February and ended a three-month period of slowing factory activity.
A PMI reading above 50 indicates expansion, while a reading below 50 indicates contraction. The September result therefore showed that manufacturing activity continued to expand, with the pace accelerating compared with August.
New Orders Rise at Fastest Pace Since February
One of the main drivers of the September improvement was a stronger flow of new orders.
Manufacturers reported that demand increased across several important industries, including electronics, food products, pharmaceuticals and textiles. The improvement was visible in both domestic and overseas markets.
Export orders also accelerated during the month. Companies surveyed for the PMI reported stronger demand from customers in markets including Brazil, Europe, the United Arab Emirates and the United States.
The improvement in international orders provides an important signal for India's manufacturing sector because export demand can support factory utilization, production and employment at the same time.
Factory Output Accelerates
Higher demand translated into stronger production during September.
The survey showed that manufacturing output increased sharply, with the pace of expansion reaching its strongest level since May. Companies linked the improvement to stronger new business orders and higher overall demand.
Manufacturers also increased purchases of raw materials and other inputs during the month. Businesses built inventories in anticipation of future sales, suggesting that companies were preparing for continued demand.
Finished-goods inventories recorded their second-largest increase in almost 12 years, according to the survey data.
Manufacturing Employment Recovers
The stronger business environment also supported a recovery in factory employment.
Manufacturing companies increased hiring during September, with employment expanding at the strongest pace since May. The increase came after manufacturing employment had declined in August.
The August decline had been the first fall in factory employment in approximately two and a half years, making the September recovery an important change in the monthly trend.
Higher employment alongside stronger production suggests that manufacturers responded to increased orders by expanding their operating capacity.
Business Confidence Improves
Manufacturers also became more optimistic about future business conditions.
Business confidence reached a four-month high in September. Companies cited stronger new enquiries and expectations of continued demand as reasons for their improved outlook.
However, business confidence remains dependent on several factors, including input costs, energy prices, international demand and the wider global economic environment.
Input Costs Increase
The recovery in manufacturing activity came alongside renewed pressure on production costs.
Input cost inflation accelerated compared with August, with manufacturers reporting higher prices for electronic components, pharmaceutical products and steel.
Although input costs increased, the pace of inflation remained below the long-term average recorded by the survey.
Manufacturers also raised selling prices during September, although the increase was described as modest and remained below the long-run trend.
Energy Costs Remain an Important Risk
Energy prices have become an increasingly important factor for manufacturers as global supply conditions remain uncertain.
Higher energy costs can affect transportation, production and operating expenses across multiple industries. For export-oriented manufacturers, rising costs can also influence international competitiveness if companies are unable to fully pass higher expenses on to customers.
Indian manufacturers therefore face a balance between stronger demand and the need to manage rising input expenses.
Electronics and Pharmaceuticals Support Growth
The September survey showed that several manufacturing categories contributed to the increase in new orders.
Electronics remained an important area of demand as global companies continue to diversify supply chains and expand production capacity across Asia.
Pharmaceutical manufacturing also recorded stronger demand, while food and textile products contributed to the overall increase in new business.
The combination of domestic consumption and overseas orders gives India's manufacturing sector multiple sources of demand rather than relying exclusively on one market.
India's Role in Global Supply Chains
The latest manufacturing figures arrive as companies around the world continue to reassess their production and sourcing strategies.
India has been seeking to expand its role in global manufacturing, particularly in electronics, pharmaceuticals, automobiles, engineering products and other industrial sectors.
Stronger export orders from Europe, the United States, the UAE and Brazil indicate that Indian manufacturers are receiving demand from a broad group of international markets.
Continued investment in factories, logistics, infrastructure and technology could influence how much of this international demand translates into long-term manufacturing capacity.
Growth Comes After Three Months of Slower Activity
The September improvement is notable because India's manufacturing sector had experienced three consecutive months of slowing growth.
The PMI fell to 52.8 in August, its lowest level in five years, before recovering to 55.1 in September.
The latest reading therefore represents a significant monthly improvement, although PMI data measure business activity through survey responses and should not be interpreted as a direct measure of industrial production growth.
What the September Data Means
The September manufacturing figures show a combination of stronger orders, higher output, renewed hiring and improved business confidence.
At the same time, rising input costs and energy-related pressures remain factors that businesses will need to monitor.
The performance of India's manufacturing sector in the coming months will depend partly on whether stronger domestic and international demand can continue while companies manage production costs.
For now, the September PMI provides evidence of a significant rebound in factory activity after the slowdown recorded through the previous three months.
Manufacturing Enters the Final Quarter With Stronger Momentum
India's manufacturing sector entered the final quarter of 2026 with stronger activity than it had recorded during August.
The increase in new orders, export demand and factory employment indicates that manufacturers experienced improved operating conditions during September.
However, continued expansion will depend on demand remaining resilient and cost pressures staying manageable.
The September PMI of 55.1 is therefore an important indicator of improving factory activity, while upcoming industrial production, trade and inflation data will provide additional information about the broader direction of India's economy.
Journalist: Vijay Singh