India’s private sector activity gathered momentum in October, reaching its highest growth rate since June as businesses benefited from stronger demand
in manufacturing and services. However, the improvement in output and new orders did not translate into stronger employment, with companies adopting a cautious approach to recruitment, according to the HSBC Flash India Composite Purchasing Managers’ Index (PMI). The Composite Output Index climbed to 56.7 in October from 55.9 in September, signalling a marked expansion in private sector activity. While the latest reading represented the strongest growth in four months, the pace remained below the average recorded during 2026 so far. HSBC said “India's manufacturing and services sectors rose to 56.7 in October from 55.9 in September, pointing to a marked monthly expansion of business activity and one that was the fastest since June. That said, the rate of increase remained below the average seen across 2026 so far." The improvement in private sector activity was driven by better market conditions and an increase in new business received by companies. Fresh orders grew at a faster pace during October, reflecting stronger demand across both domestic and international markets. Export demand showed particular strength, with new business from overseas clients recording its fastest growth in six months. Survey participants reported receiving orders from several markets, including the United States, the United Kingdom, the Middle East and Bangladesh. Hiring Growth Slows To Its Weakest Pace of 2026 Despite the improvement in business conditions, companies remained restrained in their recruitment plans. Employment increased only marginally in October, marking the slowest pace of job creation so far this year. It said, “Despite the sharper rises in output and new orders, companies in India were more cautious around hiring decisions in October. In fact, employment increased only marginally and at the slowest pace in the year-to-date.” The services sector saw staffing levels remain unchanged, bringing a nine-month run of employment growth to an end. Manufacturing firms, meanwhile, recorded a slight increase in employment. Businesses indicated that their existing workforce was adequate to handle current workloads, limiting the immediate requirement for additional employees. The figures suggest that stronger demand has yet to result in a comparable increase in hiring across the private sector. The slower pace of recruitment coincided with a reduction in pending work. Outstanding business volumes declined for the third time in four months, with the latest contraction matching the pace observed in August 2021. According to the report, the fall was among the steepest recorded since the global financial crisis. The decline in backlogs, alongside companies' assessment that existing staffing levels were sufficient, points to reduced pressure on businesses to expand their workforce immediately. Manufacturing Growth Eases, But Inventories Surge The HSBC Flash India Manufacturing PMI slipped to 54.9 in October from 55.1 in September, indicating that manufacturing continued to expand, but at a slightly slower rate. Growth in purchasing activity also moderated to its weakest level since the current expansion began in July 2021. At the same time, stocks of purchases rose at their fastest pace in eight months as supplier delivery times improved. Manufacturers also built up inventories of finished goods to prepare for stronger demand and higher new orders. The pace of expansion in finished-goods stocks reached a record high, highlighting how businesses responded to improving order books. Input Cost Inflation Eases For Seventh Consecutive Month Cost pressures across the private sector continued to moderate in October. Inflation in input prices slowed for the seventh consecutive month, reaching its lowest level in almost a year. Both manufacturing and services companies reported weaker increases in input costs, suggesting some relief from rising expenses. The moderation in inflationary pressures came alongside stronger business activity and an improvement in new orders. Companies remained positive about the outlook for business activity over the coming year, supported by expectations of improving market conditions. Business confidence rose to its highest level since May, indicating greater optimism among firms about future growth prospects. However, sentiment remained below the average recorded during 2026 so far.
