India's manufacturing sector growth accelerated to a three-month high in May, driven by robust domestic demand, according to the Purchasing Managers' Index (PMI) data released on June 1, 2026. The PMI rose to 58.9 in May from 57.8 in April, signaling a strong expansion in the sector. In PMI parlance, a reading above 50 indicates expansion, while a score below 50 denotes contraction.
Key Highlights of the PMI Report
The latest PMI data underscores the resilience of India's manufacturing sector, which has been buoyed by strong domestic demand. The index, compiled by S&P Global, showed that new orders grew at the fastest pace in three months, prompting firms to increase production. Export orders also rose, albeit at a slower rate compared to domestic demand.
Domestic Demand Drives Growth
The surge in domestic demand was a key factor behind the uptick in manufacturing activity. Panelists reported improved demand from both urban and rural markets, leading to higher sales volumes. This trend is expected to continue as the economy gains momentum, supported by government initiatives and a favorable policy environment.
Employment and Input Costs
The PMI report also highlighted a moderate increase in employment, as firms sought to meet rising demand. Input cost inflation remained elevated, but companies were able to pass on some of the cost increases to customers through higher output prices. The rate of input cost inflation softened slightly from April, providing some relief to manufacturers.
Sectoral Performance
Among the sub-sectors, consumer goods registered the strongest growth, followed by intermediate goods and capital goods. The automotive industry also reported robust performance, supported by strong demand for vehicles. However, the textile sector faced headwinds due to global demand uncertainties.
Future Outlook
Looking ahead, the manufacturing sector is expected to maintain its growth trajectory, supported by strong domestic demand and a pickup in export orders. However, challenges such as rising input costs and global economic uncertainties could pose risks. The PMI data suggests that the sector is well-positioned to navigate these challenges, given its resilience and adaptability.
The PMI report is based on responses from a panel of around 400 manufacturers. The index is a composite indicator derived from five sub-indices: new orders, output, employment, suppliers' delivery times, and stocks of purchases.
