NEW DELHI, Oct 24: India’s private sector strengthened its pace of expansion in October as businesses secured more orders, services demand improved and inflationary pressures eased, according to preliminary survey data released by HSBC and compiled by S&P Global.
The HSBC Flash India Composite Purchasing Managers’ Index (PMI) rose to 56.7 in October from 55.9 in September, reaching its highest level in four months. The latest reading indicates that business activity continued to expand, with services playing a major role in supporting overall growth.
A PMI reading above 50 indicates expansion compared with the previous month, while a reading below that level signals contraction. Although the latest figure reflects improving operating conditions, growth remained below the average recorded during 2026 so far.
The improvement comes at a time when companies are seeking to increase sales, manage operating expenses and respond to changing domestic and international demand. Stronger incoming orders suggest that businesses continue to find opportunities despite uncertainty in the global economic environment.
Services sector leads the expansion
The services sector emerged as the principal contributor to the improvement. The flash services PMI increased to 56.2 in October from 55.2 in September, marking a four-month high.
Service providers benefited from stronger customer demand and an increase in new business. The improvement suggests that commercial activity across service-oriented industries remained resilient during the month.
Manufacturing also continued to expand, although the sector’s overall momentum eased slightly. The flash manufacturing PMI declined to 54.9 from 55.1 in September, when it had reached a seven-month high.
Despite the marginal moderation, factory activity remained firmly in expansion territory. Businesses continued to report higher output and incoming orders, indicating that demand for manufactured goods had not weakened substantially.
The contrasting performance of the two sectors highlights the importance of services in sustaining India’s current economic momentum. While manufacturers continue to benefit from orders and production requirements, service providers are contributing more strongly to the acceleration in private-sector activity.
Export orders provide additional support
International demand offered another positive signal. New business from overseas markets recorded its fastest expansion in six months, according to the survey.
Indian companies reported stronger demand from markets including the United States, the United Kingdom, West Asia and Bangladesh. The increase in export orders indicates that domestic businesses continue to find opportunities beyond the Indian market.
However, the improvement was not uniform across industries. Goods producers benefited from stronger overseas orders, while growth in foreign demand for services weakened.
The distinction is important for companies that depend on international customers. Manufacturing exporters may gain from improved order books, while service exporters will need to monitor demand conditions in their principal overseas markets.
A sustained increase in international orders could support production, improve capacity utilisation and encourage companies to invest in operations. However, global economic uncertainty, trade conditions and fluctuations in transportation expenses remain factors that could affect future performance.
Inflationary pressures decline further
One of the most encouraging findings was the continued moderation in business costs. The rate of input-cost inflation eased for the seventh consecutive month, reaching its lowest level in almost a year.
Companies reported slower increases in the prices of materials and other inputs. Where costs continued to rise, respondents cited steel and transportation expenses.
The moderation in input prices may offer businesses some relief after months of pressure on operating budgets. Lower cost growth can help companies protect profit margins, maintain competitive prices and plan expenditure with greater certainty.
Selling-price inflation also slowed. The rate at which businesses increased prices for their goods and services reached its weakest level since March 2025.
Manufacturers recorded particularly subdued increases in selling prices, with the pace of factory-gate inflation at its softest in almost four years.
These developments suggest that companies faced less pressure to pass higher input costs on to customers. For consumers, slower increases in selling prices could help moderate the cost of goods and services, although the survey does not establish that overall consumer inflation will necessarily decline at the same rate.
For businesses, the combination of stronger orders and easing cost pressures offers a more favourable operating environment. Nevertheless, individual companies will continue to face different cost conditions depending on their industries, supply chains and pricing power.
Hiring remains a weak point
Despite the improvement in output and orders, employment growth slowed to its weakest pace of the year.
Service-sector companies kept staffing levels unchanged, ending a nine-month sequence of job creation. Manufacturing firms increased their workforce only marginally.
Survey responses suggested that businesses considered existing staffing levels adequate to manage current workloads. The slower pace of recruitment therefore appears to reflect companies’ ability to handle orders with available employees rather than a broad contraction in business activity.
However, the employment trend remains important for the wider economy. A sustained increase in production and services is more beneficial when it translates into additional jobs, stronger household incomes and higher consumption.
If companies continue to meet rising demand without recruiting, productivity may improve in the short term, but the broader employment benefits of economic expansion could remain limited.
Businesses will need to assess whether the increase in new orders is temporary or likely to continue before making longer-term hiring commitments.
Outstanding workloads decline
The survey also recorded a decline in outstanding business for the third time in four months. The pace at which companies cleared backlogs was among the strongest in more than six years.
The reduction suggests that businesses were able to process pending orders despite receiving additional work. Better management of workloads can help firms improve delivery times and reduce pressure on production schedules.
For service providers, clearing backlogs may improve customer satisfaction and allow teams to focus on new assignments. Manufacturers may benefit from more efficient scheduling and better coordination between procurement and production.
However, a continued decline in outstanding work alongside strong incoming orders will require monitoring. If new business remains robust, companies may eventually need additional capacity or staff to sustain delivery performance.
Manufacturers build inventories ahead of festive demand
Manufacturing companies continued to purchase inputs, although the pace of purchasing growth slowed to its weakest level since July 2021.
At the same time, stocks of purchased materials increased substantially as supplier delivery times shortened. Inventories of finished goods also rose at a record pace, reflecting companies’ efforts to prepare for festive-season demand.
Building inventories can help businesses respond quickly to customer purchases and avoid shortages during periods of stronger sales. Improved supplier delivery times can also reduce uncertainty in production planning.
However, higher inventory levels carry financial costs. If festive demand fails to meet expectations, companies could face excess stock, increased storage expenses and pressure on working capital.
Businesses will therefore need to balance expectations of stronger sales against the risks of overproduction.
Business confidence improves
Companies surveyed by S&P Global remained optimistic about activity over the coming year. Business confidence improved to its highest level since May, although it remained below the average for 2026.
The improvement indicates that firms expect market conditions to remain supportive. Nevertheless, the relatively subdued confidence reading suggests that businesses have not completely set aside concerns about demand, costs and the global outlook.
The October survey presents a broadly positive picture of India’s private sector, with stronger orders, expanding output and easing inflationary pressures. Yet the slowdown in recruitment and the moderation in manufacturing growth show that the recovery is not uniform across all aspects of business activity.
The next set of PMI readings will help determine whether the improvement is sustained and whether it begins to generate stronger hiring and investment.
For now, the latest data indicate that India’s businesses entered the second half of October with improving demand conditions and some relief on costs, while remaining cautious about expanding their workforces.