India’s manufacturing sector logged its sharpest input cost inflation in nearly four years in May 2026, even as demand growth slowed and output expansion weakened, according to HSBC Flash India PMI data released on May 21.
Moreover, new export orders across India’s private sector hit a 19-month low in May. Goods producers recorded their second-slowest rise in international sales since September 2024, with panellists citing competitive pressures, challenging demand conditions, travel disruptions and the war in the Middle East.
Pranjul Bhandari, Chief India Economist at HSBC, said: “Cost pressures intensified, with input prices rising at the sharpest rate since July 2022. Manufacturing activity eased marginally as the rates of expansion in output and new orders moderated, while growth of new export orders softened markedly.”
What drove costs higher
Survey respondents cited higher prices for energy, food, fuel, gas, iron, leather, oil, plastics, rubber, steel and transportation. The composite-level input price index reached its second-highest point in nearly three years in May.
Firms absorb the hit
Output charge inflation rose at its weakest pace since January, considerably softer than the rise in input prices, as manufacturers held back on passing costs to buyers.
Stockpiling holds up the PMI
The HSBC Flash India Manufacturing PMI fell to 54.3 in May from 54.7 in April, its second-weakest reading in close to four years. Bhandari noted the PMI “remained broadly in line with its long-run average, supported by continued inventory building.” Finished goods stocks rose for a second consecutive month and stocks of purchases increased at the fastest rate in three months.
The report said: “New business placed with manufacturing companies and their services counterparts increased at softer rates in May, therefore dragging down growth at the composite level. Notably, the pace of expansion among goods producers was the second-weakest in close to four years. According to panellists, sales were somewhat dampened by competitive pressures, challenging demand conditions, disruptions to travel and the war in the Middle East.”
Services offsets manufacturing drag
The HSBC Flash India Services PMI Business Activity Index edged up to 58.9 from 58.8 in April, with service providers reporting softer inflationary pressures than manufacturers. The Composite PMI Output Index held at 58.1, down marginally from 58.2 in April.
