The West Asia war-induced global slowdown has dampened Indian manufacturing and services, with India’s private-sector economy losing momentum in the first quarter of 2026-27 as early survey data indicated a weaker expansion in both sectors in June.
The month saw slower growth in new orders, international sales, employment and business activity, weakening overall business activity, according to the HSBC Flash India Composite PMI Output Index (PMI), released on Tuesday.
The flash survey, an advance estimate ahead of the final Purchasing Managers’ Index (PMI) readings, offers an early indication of shifts in economic sentiment and output.
The index, compiled by S&P Global, fell to 57.4 in June from the revised May figure of 59.3. The reading, though, remains comfortably above the 50-point threshold that separates expansion from contraction.
“The HSBC Flash India PMI Composite Output Index signalled a sharp rate of expansion that was nevertheless the weakest since March,” the survey said.
showed signs of stress with the slowest expansion in factory production in the past two months. The HSBC Flash India Manufacturing PMI Output Index fell to 57.4 in June from 58.0 in May.
, meanwhile, saw a deeper fall in output in June, with expansion easing to a 17-month low. The Flash Services Business Activity Index fell to 57.3 in June from the revised reading of 59.8 in May.
The broader HSBC Flash India Manufacturing PMI fell to 54.5 in June from 55.0 in May, a three-month low.
The final PMI data for June will be released early in July.
The West Asia war effect
“Overall, new order volumes continued to rise strongly in June, despite the rate of expansion slowing to the weakest in three months. Growth eased at manufacturing firms and their services counterparts, as some companies struggled to secure new work. Competitive pressures, rising fuel prices and shortages of gas were often cited as hindrances,” the survey said.
Export trends were mixed during the month, as faster growth in the services economy contrasted with the weakest increase at manufacturers since March 2023. At the composite level, international sales expanded at a solid pace, though this was the slowest in 21 months, according to the survey.
June’s moderation in new business growth stymied job creation. Employment still rose, though it did so only marginally and to the least extent in the current six-month sequence of expansion. Hiring activity at both goods producers and service providers was the least marked since December 2025, it added.
“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. New export orders remained resilient, and the order-to-inventory ratio ticked up, pointing to resilient manufacturing activity down the line, said Pranjul Bhandari, chief India economist at HSBC.
Input costs across the private sector rose, but at the slowest pace in five months, he added.
Positive outlook
Even with weaker expansion, companies remained confident that output would increase over the coming 12 months. “…but the overall degree of optimism was the weakest since January and below the long-run series average. Notably, the level of positive sentiment at manufacturers fell to the lowest in close to four years,” the survey noted.
Goods producers limited buying activity, which rose at the weakest pace in two-and-a-half years during June, said the survey, adding that subsequently, there was a softer increase in stocks of purchases and an outright decline in inventories of finished products.
Also, private-sector companies continued to report month-on-month increases in their expenses, which they often attributed to higher material prices, said the survey.
In particular, the survey participants cited higher costs for chemicals, food, fuel, gas, metals, and utilities. “That said, the overall rate of inflation eased for the third successive month to its lowest since January. Cost pressures remained more pronounced in manufacturing than in services,” the survey added.
Although Indian goods producers raised their fees to a greater extent than services companies, rates softened in both cases. At the composite level, the overall rise in charges seen in June was modest and the least pronounced in six months. Anecdotal evidence highlighted a reluctance among some businesses to raise their fees amid challenging demand conditions and competitive pressures, the survey said.
The flash PMI data is based on responses from around 400 manufacturers and 400 service providers.