India’s private sector showed a modest improvement in August after hitting a more than four-year low in July, as stronger services activity helped offset a sharp slowdown in manufacturing. The HSBC flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 54.6 in August from 54.3 in July.

While a PMI reading above 50 indicates expansion, the latest figure remains considerably below India’s recent average of around 60, highlighting the softer pace of private-sector growth.

Services remained the main source of support for overall business activity during August. The services PMI climbed to 54.5 from 53.3 in July, when it had touched a 53-month low. The improvement in the dominant sector helped lift the composite reading despite continued weakness in manufacturing.

Demand indicators also showed some improvement. New orders increased at a faster pace during the month, although growth remained subdued compared with the sector’s longer-term trend.

Businesses continued to report challenging market conditions, intense competition and weaker customer requirements as factors limiting demand. Growth in export orders also slowed compared with July.

Manufacturing Slumps to Weakest Level Since 2021

The manufacturing sector painted a much weaker picture. Manufacturing PMI declined for a third consecutive month, falling to 52.9 in August from 53.5 in July. The reading marked the factory sector’s weakest performance since August 2021.

Both manufacturing output and new orders expanded at their slowest rates in five years, pointing to a broader cooling in factory activity.

The slowdown was also reflected in employment. Manufacturing staffing declined for the first time in two-and-a-half years, indicating that companies in the sector are becoming more cautious about workforce expansion amid softer business conditions.

The broader employment picture was more encouraging, largely because of stronger hiring in services.

Overall private-sector employment accelerated to its joint-fastest pace since June 2025. Services-sector hiring reached a 15-month high, helping offset the decline in manufacturing employment.

The divergence between the two sectors highlights the uneven nature of India’s current private-sector expansion. While services companies are adding workers at a stronger pace, manufacturers are facing weaker output and demand conditions.

Input Cost Pressures Ease, Selling Prices Rise

Cost pressures provided some relief to businesses during August.

Overall input price inflation eased to a seven-month low, suggesting that companies faced less pressure from rising input costs than in recent months.

However, businesses simultaneously increased their selling prices at the fastest pace since April. Companies appeared to be passing a greater portion of their costs on to customers, potentially keeping an eye on margins even as demand remains relatively soft.

The combination of easing input costs and faster selling-price increases could remain important for tracking inflationary pressures in the months ahead.