India's crucial manufacturing sector exhibited a significant slowdown in growth momentum as 2025 drew to a close, with a key activity index falling to its lowest level in two years. The latest data reveals a sharp deceleration from the robust expansion witnessed just a few months prior, signaling potential headwinds for the industrial economy.
Sharp Decline from Five-Year High
The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) dropped to 55.0 in December 2025, down from 56.6 recorded in November. This marks the weakest reading since December 2023. The decline appears more pronounced when viewed against the recent peak. The index had soared to a near five-year high of 59.2 in October 2025, indicating that the slowdown over the last two months has been both rapid and substantial.
Analyzing the Slowdown
While a PMI reading above 50 still indicates expansion, the consecutive monthly falls point towards a cooling of growth rates. The drop from 59.2 to 55.0 within a span of two months suggests that factors which fueled the October surge may have faded or that new challenges have emerged. This data, compiled by S&P Global and released on January 2, 2026, provides one of the first snapshots of economic activity for the final month of the previous year.
Economists and industry watchers will be scrutinizing the sub-indices of the PMI report for clues. The main drivers behind the slowdown could include:
- A potential softening in new order inflows, both domestic and export.
- Pressures on operating costs and supply chain dynamics.
- A more cautious approach to inventory building by businesses.
Implications for the Economic Landscape
The manufacturing sector is a major contributor to India's GDP and employment. A sustained period of moderating growth could have broader implications for the economy's overall expansion trajectory. Policymakers and the Reserve Bank of India (RBI) are likely to monitor this trend closely, as it influences decisions related to interest rates and fiscal support.
The report, authored by Gyanendra Keshri, highlights a pivotal shift in the industrial growth narrative as the new year begins. The focus now shifts to whether this is a temporary blip or the start of a more prolonged phase of moderated expansion, and what measures might be needed to reinvigorate the sector's growth engine in 2026.
