India's industrial production growth slowed in October 2026, although export orders recorded their strongest increase in the last six months. This is according to the results of a survey by HSBC and S&P Global, cited by Reuters.
The purchasing managers' index (PMI) in the manufacturing sector fell to 54.7 points in October from 55.1 points in September. The result was also below the preliminary estimate of 54.9 points.
Despite the slowdown, the indicator remains well above the 50-point mark that separates growth from contraction in economic activity. This means that India's manufacturing sector is continuing to expand, albeit at a more moderate pace.
The main reason for the slowdown is weakening domestic demand. New orders continue to rise, but their pace has slowed compared to September, when they reached a seven-month peak.
Against this backdrop, foreign markets are becoming an increasingly important driver for Indian manufacturers. New export orders are increasing at the fastest pace in six months, partly offsetting weaker domestic activity.
Factories are building up record inventories
The trend in inventories is particularly telling. Indian manufacturers are building up their inventories of finished goods at the fastest pace in the survey's more than 21-year history.
Companies are citing the need to meet demand and prevent possible shortages of goods.
At the same time, growth in purchases of raw materials and supplies is slowing to its lowest level in 64 months of continuous growth.
The divergence shows that companies are acting cautiously in the face of an uncertain international economic environment.
Manufacturers are also building up their inventories of raw materials at the fastest pace in eight months to protect themselves against possible supply disruptions.
Companies are hiring fewer workers
The labor market is also showing signs of cooling. Manufacturing employment rose for the second consecutive month, but the pace of job creation slowed compared to September.
Some capital goods manufacturers are even laying off staff.
Business confidence also weakened slightly and remains below its long-term average, indicating more cautious expectations for production development in the coming months.
Price pressures at their weakest in nearly four years
A positive sign for the Indian economy is the weakening of inflationary pressures in industry.
The rate of increase in raw material costs fell to its lowest level since February, and the price increase in finished goods was the weakest in nearly four years.
This shows that manufacturers have limited scope to increase selling prices, although costs continue to grow.
The data paints a mixed picture for one of the world's largest economies. On the one hand, strong international demand is supporting Indian factories. On the other, slowing domestic orders, cautious hiring and large inventory buildups suggest that companies are bracing for a period of greater uncertainty.
For now, Indian industry remains in growth territory, but its development in the coming months will depend largely on the resilience of exports and the recovery of domestic demand.