India’s manufacturing sector continued to expand in December, albeit at a slower pace, as the HSBC Manufacturing Purchasing Managers’ Index (PMI) declined to 55.0 from 56.6 in November, marking a 38-month low, according to S&P Global. Despite the drop, the index remained well above the 50-point mark that separates growth from contraction.

Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, noted that the sector ended the year on a solid footing despite the slowdown. She highlighted that the rise in new business should keep companies busy in the final fiscal quarter, while the absence of major inflationary pressures could continue to support demand.

New business continued to grow in December, but the pace was the slowest since December 2023. Factory output also expanded, though at its weakest rate since October 2022. The slower increase in orders prompted companies to be more cautious in purchasing raw materials, even though overall buying still rose.

Growth in export orders weakened during the month, with international demand increasing at its slowest pace in 14 months. Manufacturers who saw growth attributed it primarily to stronger demand from Asia, Europe, and the Middle East. De Lima pointed out that the share of companies reporting higher international sales in December was about half the 2025 average, with exports largely confined to fewer markets. She added that with Indian manufacturers facing lower cost pressures than elsewhere, competitive pricing could help attract new business from other regions in the year ahead.

Job creation remained muted as manufacturers added only a small number of workers, marking the weakest increase since the current growth phase began in March 2024. Slightly higher unfinished work suggested that companies were generally able to manage workloads with existing capacity. While manufacturers remain optimistic about output growth in 2026, overall confidence fell to its lowest level in nearly three-and-a-half years. Although steady demand, advertising, and new product launches provide some support, concerns about strong competition and market uncertainty persist.