India's private sector activity slowed in June, with the HSBC Flash India PMI Composite Output Index dropping to a preliminary 57.4. This marks the weakest expansion since March, driven by cooling demand and leading to curbed hiring.
Private Sector Activity Eases in June
India's private sector activity expanded at a slower pace in June as a cooling demand for goods and services restricted overall production levels and curbed hiring across industries.
According to the HSBC India PMI report released on Tuesday, the HSBC Flash India PMI Composite Output Index dropped from 59.3 in May to a preliminary reading of 57.4 in June. The index, which measures the combined month-on-month output changes in both the manufacturing and service sectors, still signalled a sharp expansion, but the rate of growth was the weakest recorded since March. At the same time, the HSBC Flash India Manufacturing PMI edged down to a three-month low of 54.5 in June, compared to 55.0 in May.
Pranjul Bhandari, Chief India Economist at HSBC, said, "Private sector activity eased a bit in June. Growth of manufacturing output softened a tad as inventory-building lost steam after a few hectic months." The economic deceleration was visible across both major sectors. Manufacturing output expansion cooled to a two-month low, while the services sector witnessed its slowest growth in 17 months.
The report attributed this widespread moderation to persistent cost pressures and softening demand conditions. While overall new order volumes continued to rise strongly, the pace of growth slowed to a three-month low. Companies across both sectors reported difficulties in securing new clients. Firms frequently identified intense market competition, escalating fuel prices, and gas shortages as primary operational hindrances. "New export orders remained resilient and the order-to-inventory ratio ticked up, pointing at resilient manufacturing activity down the line. Input costs across the private sector rose, but at the slowest pace in five months," Bhandari added.
Job Creation Weakens
The slowdown in new orders directly affected job creation. As per the report, employment levels increased only marginally, marking the weakest growth in the current six-month sequence of hiring expansion. Recruitment activity for both goods producers and service providers hit its lowest level since December 2025, as firms found current staffing levels sufficient to manage outstanding business volumes, which remained unchanged.
Input Costs Rise but Inflation Slows
On the price front, private sector expenses rose due to higher material costs, particularly for chemicals, food, fuel, gas, metals, and utilities. However, overall input cost inflation slowed for the third consecutive month to its lowest since January. Selling charges rose modestly at the composite level, marking the softest increase in six months. Challenging demand conditions and competitive pressures made businesses reluctant to pass higher costs on to consumers.
Future Outlook Weakens
Looking ahead, the report mentioned that businesses maintained a positive outlook for production over the next 12 months, but the overall degree of optimism dropped to its lowest since January. Positive sentiment among manufacturers specifically hit a near four-year low. This prompted goods producers to limit their purchasing activity, which grew at the slowest pace in two-and-a-half years, causing a decline in finished goods inventories. (ANI)
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