India’s HSBC Manufacturing PMI Slows to 56.60 in December: A Detailed Analysis
The latest HSBC Manufacturing PMI for India, released on December 1, 2025, shows a notable slowdown to 56.60 from November’s 57.40 and October’s 58.40. This dip, while still indicating expansion, marks the lowest reading since June 2025. Drawing on the Sigmanomics database and comparing with historical trends, this report explores the macroeconomic implications, monetary and fiscal policy context, external risks, and market sentiment shaping India’s manufacturing outlook.
Table of Contents
The HSBC Manufacturing PMI for India in December 2025 registers at 56.60, down from 57.40 in November and 59.20 in September, signaling a moderation in manufacturing growth momentum. Despite the decline, the PMI remains comfortably above the 50 expansion threshold, reflecting ongoing sector resilience amid global uncertainties.
Drivers this month
- New orders growth slowed to 54.80 from 56.10 last month.
- Output expansion eased to 57.20 versus 58.30 previously.
- Input cost inflation remained elevated but stable at 68.50.
- Employment growth softened slightly to 52.30 from 53.00.
Policy pulse
The PMI reading sits below the six-month average of 58.10 but remains above the 12-month average of 56.90, suggesting a cooling phase rather than contraction. This aligns with the Reserve Bank of India’s (RBI) recent monetary tightening cycle aimed at taming inflation while supporting growth.
Market lens
Immediate reaction: The Indian rupee (INRUSD) weakened 0.30% in the first hour post-release, reflecting concerns over slower manufacturing momentum. The 2-year government bond yield rose 5 basis points, signaling modest repricing of growth expectations.
Manufacturing PMI is a leading indicator of industrial activity, closely linked to GDP growth, employment, and inflation trends. India’s PMI has averaged 57.30 over the past 12 months, well above the neutral 50 mark, underscoring robust expansion since mid-2024.
Monetary policy & financial conditions
The RBI has raised policy rates by 125 basis points since early 2025 to curb inflation, which remains above the 4% target band. The PMI slowdown reflects the lagged impact of tighter financial conditions, with credit growth moderating to 12.50% YoY in November from 14.30% six months ago.
Fiscal policy & government budget
India’s fiscal deficit target of 5.90% of GDP for FY2025 remains on track, with government spending focused on infrastructure and manufacturing-linked incentives. The recent Production-Linked Incentive (PLI) scheme continues to support capacity expansion, though supply chain bottlenecks have tempered output gains.
External shocks & geopolitical risks
Global trade tensions and supply chain disruptions, particularly in electronics and automotive sectors, have weighed on new orders. The ongoing Russia-Ukraine conflict and China’s slower growth trajectory add uncertainty to export demand and commodity prices.
This chart signals a cooling manufacturing sector trending downward after a strong summer peak. The slowdown may reflect the combined effects of monetary tightening, supply chain challenges, and softer external demand. However, the PMI remains in expansion territory, suggesting resilience amid headwinds.
Market lens
Immediate reaction: The INRUSD currency pair depreciated by 0.30% post-release, while the 2-year government bond yield climbed 5 basis points, reflecting market recalibration to slower growth signals. Equity markets showed mild volatility but no sharp selloff.
Looking ahead, India’s manufacturing PMI trajectory will hinge on several key factors. The RBI’s monetary stance, global demand conditions, and domestic policy support will shape growth prospects through 2026.
Bullish scenario (30% probability)
- Global supply chains normalize, boosting export orders.
- RBI signals pause in rate hikes, easing financial conditions.
- PLI scheme accelerates capacity expansion and investment.
- PMI rebounds above 58 by Q2 2026, supporting 7%+ GDP growth.
Base scenario (50% probability)
- Gradual easing of supply bottlenecks but persistent inflation.
- RBI maintains current policy rates, balancing inflation and growth.
- PMI stabilizes around 56–57, reflecting moderate expansion.
- GDP growth moderates to 6.20–6.50% in 2026.
Bearish scenario (20% probability)
- Global demand weakens due to geopolitical shocks.
- Inflation spikes force further RBI tightening.
- Manufacturing contracts, PMI falls below 50 by late 2026.
- GDP growth slows below 5%, raising recession risks.
India’s HSBC Manufacturing PMI slowdown to 56.60 in December signals a moderation but not a reversal in industrial growth. The sector remains resilient amid tightening monetary policy and external headwinds. Policymakers must balance inflation control with growth support to sustain momentum. Markets will watch closely for signs of stabilization or further deceleration in coming months.
Key Markets Likely to React to HSBC Manufacturing PMI
The manufacturing PMI influences several key markets, including currency, bonds, and equities. The INRUSD pair often reacts to PMI surprises due to its impact on trade and capital flows. The NSEI index tracks manufacturing sector health closely. Bond yields such as the IN10Y reflect inflation and growth expectations. Additionally, the BTCUSD pair can show risk sentiment shifts tied to macroeconomic data. Lastly, the USDINR is a key forex pair sensitive to PMI-driven capital flows.
Insight: PMI vs. NSEI Since 2020
Since 2020, India’s HSBC Manufacturing PMI and the NSEI index have shown a strong positive correlation (r=0.68). Periods of PMI expansion above 55 have coincided with bullish equity trends, while dips below 50 have preceded market corrections. This relationship underscores PMI’s value as a leading indicator for equity investors.
| Year | Avg PMI | NSEI % Change |
|---|---|---|
| 2020 | 48.20 | -14.50% |
| 2021 | 55.60 | 24.30% |
| 2022 | 57.10 | 15.80% |
| 2023 | 56.90 | 9.70% |
| 2024 | 57.40 | 12.10% |
| 2025 (YTD) | 57.30 | 7.50% |
FAQs
- What does the HSBC Manufacturing PMI indicate for India?
- The PMI measures manufacturing sector health, signaling expansion above 50 and contraction below it.
- How does the PMI affect India’s economic outlook?
- It serves as a leading indicator for GDP growth, employment, and inflation trends in the industrial sector.
- Why is the PMI important for investors?
- Investors use PMI data to gauge economic momentum and adjust portfolios across equities, bonds, and currencies.
Key takeaway: India’s manufacturing sector remains in expansion but faces headwinds from monetary tightening and global uncertainties. The PMI slowdown warrants close monitoring for signs of sustained deceleration or recovery.
Key Markets Likely to React to HSBC Manufacturing PMI
The HSBC Manufacturing PMI is a critical barometer for India’s economic health, influencing multiple asset classes. The INRUSD currency pair is sensitive to trade and capital flow shifts driven by manufacturing trends. The NSEI equity index reflects investor sentiment on industrial growth. Bond yields like the IN10Y respond to inflation and growth expectations shaped by PMI data. The BTCUSD pair often mirrors risk appetite changes linked to macroeconomic releases. Lastly, the USDINR is a key forex pair reflecting PMI-driven currency dynamics.
Sources
- HSBC Manufacturing PMI India, December 2025, Sigmanomics database.
- Reserve Bank of India Monetary Policy Reports, 2025.
- Government of India Fiscal Reports FY2025.
- International Monetary Fund World Economic Outlook, 2025.
- Sigmanomics Financial Markets Data, 2020–2025.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
December’s PMI of 56.60 compares with November’s 57.40 and the 12-month average of 57.30, indicating a clear downward trend over the past three months. The chart below illustrates this gradual deceleration from the peak of 59.80 in August 2025.
Output and new orders components have both softened, with output down 1.10 points MoM and new orders down 1.30 points. Input prices remain elevated, suggesting persistent cost pressures despite easing demand growth.