India’s manufacturing growth slows to two-year low in December amid softer orders

India’s manufacturing sector continues to expand, but the pace of growth slowed in December, ending 2025 with the weakest improvement in two years. Slower growth in new orders prompted companies to limit input purchases and job creation, according to the latest HSBC India Manufacturing PMI survey.

The seasonally adjusted PMI , a key indicator of sector performance, fell to 55 in December from 56.6 in November. In PMI terms, a reading above 50 signals expansion, while below 50 indicates contraction. While factories are still growing, the decline shows that the pace of expansion is easing , with production growth dropping to a 38-month low.

The HSBC India Manufacturing PMI , compiled by S&P Global , is based on responses from around 400 purchasing managers across the manufacturing sector. It tracks trends in production, new orders, employment, and pricing, offering a snapshot of how India’s factories are performing.

“Even with growth easing, India’s manufacturing industry finished 2025 in good shape. New business intakes should keep companies busy in the final fiscal quarter, and the lack of major inflationary pressures could continue to support demand,” said Pollyanna De Lima , Economics Associate Director at S&P Global Market Intelligence .

The survey showed that new orders , particularly from international markets, grew at the slowest pace in 14 months. Exports to Asia, Europe, and the Middle East increased only slightly, and the number of companies reporting higher international sales was about half the 2025 average , reflecting cautious global demand.

Despite government initiatives such as production-linked incentives and the “ Make in India ” program, growth slowed due to several factors. Companies were cautious with input purchases and hiring, relying on confirmed orders before expanding production. Export growth remained limited, and newly established factories take time for policy support to fully translate into actual output. Firms also face competitive pressures that restrain rapid expansion.

On the employment front, factory jobs increased only slightly in December, the slowest pace since March 2024. Input costs rose at a historically modest rate, while charge inflation eased to a nine-month low, reflecting stable production costs.

Looking ahead, manufacturers remain cautiously optimistic. Most expect output to rise in 2026, supported by new product launches, advertising, and steady domestic demand. However, overall sentiment is the lowest in nearly three-and-a-half years, as companies remain wary of market uncertainty and competitive pressures.

“With lower cost pressures than elsewhere, Indian manufacturers are hoping that competitive pricing will help attract new business from other regions in 2026,” Lima added.