Growth Holds, Momentum Eases: India’s Private Sector Expansion Slows In September Amid Softer Demand

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India’s private sector continued to expand in September 2025, but the pace of growth moderated from August’s multi-year highs. According to the HSBC Flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, the index fell to 61.9 from August’s final reading of 63.2. While still well above the 50-point threshold that separates growth from contraction, the dip signals a cooling in business activity across both manufacturing and services sectors.

The slowdown is attributed to softer domestic and international demand, competitive pressures, and cautious hiring trends. Despite these headwinds, business sentiment remains upbeat, buoyed by recent tax cuts and expectations of festive season demand.

Key Highlights From The PMI Survey

- Composite PMI declined to 61.9 in September from 63.2 in August

- Manufacturing PMI slipped to 58.5 from 59.3

- Services activity index fell to 61.6 from 62.9

- New business orders grew but at a slower pace

- Export orders expanded at the weakest rate in six months

- Employment growth remained modest across sectors

- Input cost inflation eased, but manufacturers raised selling prices sharply

- Business confidence rose to a seven-month high

Sectoral Performance And Demand Trends

The moderation in growth was broad-based, affecting both factory output and services activity. While new orders continued to rise, the rate of expansion slowed due to intense competition and cautious consumer spending. Several firms reported that order volumes were constrained by pricing pressures and delayed decision-making.

International demand also weakened, particularly in the services sector. Export orders grew at the slowest pace in half a year, reflecting global uncertainties and the impact of rising tariffs from key trading partners.

Hiring And Employment Outlook

Despite robust expansion, job creation remained subdued. Only about 3 percent of manufacturers and 5 percent of service providers reported an increase in payrolls. This suggests that businesses are prioritizing productivity and cost control over workforce expansion.

The slow pace of hiring poses a challenge for policymakers, especially in a labor-intensive economy like India, which needs to generate millions of jobs annually to absorb its growing workforce.

Inflationary Pressures And Pricing Dynamics

Input cost inflation showed signs of easing, but manufacturers raised selling prices at the steepest rate in nearly 13 years. This was driven by higher costs for raw materials such as cotton and steel. In contrast, service sector price increases moderated, offering some relief to consumers.

The divergence in pricing trends reflects sector-specific cost structures and competitive dynamics. While manufacturers passed on higher costs to protect margins, service providers opted for pricing restraint to retain demand.

Business Sentiment And Policy Support

Despite the slowdown, business confidence improved to its highest level in seven months. Firms expressed optimism about future demand, citing recent cuts to the goods and services tax (GST) as a potential catalyst for consumer spending.

The GST reductions, which took effect on September 22, are expected to stimulate demand across food, personal care, and retail segments. Companies are hopeful that the festive season will provide a boost to sales and help offset the current moderation in growth.

Looking Ahead

India’s private sector remains on a solid footing, but the September data suggests that momentum is softening. The challenge ahead lies in sustaining growth amid global headwinds, competitive pressures, and uneven job creation.

Policymakers may need to consider targeted interventions to support employment and exports, while businesses focus on innovation, efficiency, and customer engagement to navigate the evolving landscape.

Sources: Times Now News, Economic Times, NewsBytes

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