Manufacturing Output Growth Slips to 3-Month Low on Weak Demand, India-Pakistan Conflict

Ira Singh
Khabar Khabaron Ki,05 June’25

India’s manufacturing sector lost some momentum in May, with output growth easing to a three-month low amid weakening demand conditions and disruptions from the ongoing India-Pakistan conflict, according to the latest S&P Global Purchasing Managers’ Index (PMI) data.

The manufacturing PMI fell to 57.6 in May, down from 58.2 in April. While the reading still indicates robust expansion—remaining well above the 50-mark that separates growth from contraction—it reflects a moderation in both new orders and production growth.

“India’s May manufacturing PMI signalled another month of robust growth in the sector, although the rate of expansion in output and new orders eased from the previous month,” Pranjul Bhandari, Chief India Economist at HSBC, reportedly stated. She attributed the softening momentum to cost pressures, increased competition, and geopolitical tension due to the India-Pakistan conflict, which adversely impacted supply chains and demand sentiment.

Experts observed that although demand remained broadly favourable,improvement was slower due to higher input costs and more careful business decisions amid regional tensions.

According to information new export orders rose at one of the fastest rates in three years, with firms citing increased demand from Asia, Europe, the Middle East, and the United States.

One of the most encouraging developments was a surge in employment. The rate of job creation rose to its highest since S&P Global began reporting the PMI, with around 12% of surveyed firms reporting higher headcounts. More permanent job roles were created compared to temporary ones, reflecting stronger business confidence.

“The acceleration in employment growth to a new peak is certainly a positive development,” Bhandari added. “Sustained job creation enabled manufacturers to stay on top of their workloads,” with outstanding business volumes remaining unchanged in May, ending a six-month streak of backlog accumulation.

However, the sector also saw rising cost pressures, driven by a surge in input prices. Manufacturers reported sharp price increases in raw materials such as aluminium, cement, iron, leather, rubber, and sand. The overall input cost inflation in May hit its highest level since November 2024.

In addition to higher material costs, firms noted increased spending on freight and labour. To offset these expenses, manufacturers raised selling prices, supported by resilient demand conditions, according to S&P Global.