Manufacturing PMI hits 17-year high in Aug with strong demand, high output

In what would be pleasing news for the Indian economy, the country’s manufacturing sector saw in August the fastest improvement in operating conditions in more than 17 years, propelled by increased production efficiency and robust demand conditions, a monthly report revealed on Monday (September 1).

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) increased from 59.1 in July to 59.3 in August, signifying the most rapid enhancement in operating conditions in 17-and-a-half years.

In the PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

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US tariff impact

Pranjul Bhandari, Chief India Economist at HSBC, said, “India’s manufacturing PMI hit another new high in August, driven by a rapid expansion in production. The increase of US tariffs on Indian goods to 50 per cent might have contributed to the slight easing in new export orders growth, as American buyers refrain from placing orders in the midst of tariff uncertainty.”

A steep US tariff of 50 per cent on Indian goods took effect on August 27. The tariffs – among the highest in the world – include a 25 per cent penalty for buying crude oil from Russia.

Underlying data showed a softer increase in international orders placed with Indian manufacturers. The rise was the weakest for five months, though sharp by historical standards. Firms reported having secured new work from clients in Asia, Europe, the Middle East and the US.

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At the same time, incoming new orders increased to a level comparable to that of July, which marked the highest rate in 57 months. Alongside the robust demand, those surveyed attributed the growth to successful advertising efforts.

“Overall orders growth, on the other hand, held up much better, suggesting that domestic orders remained robust, helping to cushion against tariff-related drag on the economy. Manufacturers’ continued optimism for future output is a positive sign,” Bhandari said.

Strong growth in April-June

Meanwhile, the Indian economy reported a stronger-than-expected 7.8 per cent growth in April-June, its fastest pace in five quarters.

Chief Economic Adviser V Anantha Nageswaran has said since the trade impasse with the US is continuing for the moment, there will be some impact in the second quarter, as increased tariffs on Indian shipments took effect in August.

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He expressed optimism that the tariff impact on growth activities will be contained to the second quarter, and maybe at most a part of the third quarter.

er the survey, in August, companies increased the rate at which additional materials were purchased, and more jobs were generated, which partially indicates positive expectations concerning the future outlook.

Sector-wise numbers

The strongest sales and output performances were noted in the intermediate goods category, followed by capital and then consumer goods.

On the job front, the report said employment rose for the 18th month in a row during August. Despite slowing to the weakest since November 2024, the pace of job creation was historically solid as manufacturers were confident that the output would increase over the course of the coming 12 months.

The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.

(With Agency inputs)