NEW DELHI/MUMBAI: India's manufacturing sector activity surged to a four-month high in February 2026, with the HSBC India Manufacturing Purchasing Managers' Index (PMI) climbing to 56.9 from 56.5 in January, on the back of strongest demand in nearly a year [citation:1][citation:3]. The print signals a sustained robust expansion in the sector as new orders and production grew at sharper rates, while international sales increased at the quickest pace in six months [citation:3][citation:5].
The headline figure remained firmly above its long-run average (54.2) and comfortably above the neutral 50-mark that separates expansion from contraction. The PMI has now signalled improvement in the health of the manufacturing sector for 56 consecutive months [citation:4].
- Output: Fastest expansion since October 2025 (4-month high) [citation:1]
- New Orders: Sharpest increase in 11 months; supported by marketing, favourable demand [citation:3]
- Exports: International sales growth at 6-month high; demand from Asia, Europe, Americas [citation:5]
- Employment: Job creation accelerates to 3-month high as firms expand capacity [citation:4]
- Business confidence: Sentiment at 8-month peak; firms expect sustained demand [citation:6]
- Price pressures: Input costs rise at moderate pace; output charges increase slightly [citation:3]
Demand resilience fuels production surge
Manufacturers surveyed by HSBC reported a substantial improvement in the volume of new orders, with the sub-index hitting its highest level since March 2025 [citation:3]. Panel members attributed growth to favourable economic conditions, successful advertising, and stronger client relationships. Consumption goods remained the best-performing category, though intermediate and investment goods also recorded robust expansions [citation:4].
"India's manufacturing upturn gained further traction in February, supported by strong demand and favourable market conditions. The acceleration in new orders suggests that the sector is carrying strong momentum into the final quarter of the fiscal year," said Pranjul Bhandari, Chief India Economist at HSBC [citation:5].
Exports at six-month peak
International demand for Indian manufactured goods improved substantially, with new export orders rising at the fastest pace since August 2025 [citation:5]. Companies cited increased sales to clients in Asia, Europe, and North America, underscoring India's competitiveness in sectors such as chemicals, auto components, and electronics.
PMI trend (last 6 months)
| Month | PMI (Manufacturing) | Change |
|---|---|---|
| Feb 2026 | 56.9 | ▲ +0.4 |
| Jan 2026 | 56.5 | ▲ +0.1 |
| Dec 2025 | 56.4 | ▼ -0.3 |
| Nov 2025 | 56.7 | ▲ +0.3 |
| Oct 2025 | 56.4 | ▼ -0.5 |
| Sep 2025 | 56.9 | ▬ 0.0 |
Job creation accelerates
February data pointed to a third consecutive monthly increase in manufacturing employment. The rate of job creation was the fastest in three months, as firms responded to rising workloads by expanding their workforce [citation:4]. Survey respondents noted that part-time and full-time positions were added, particularly in consumer goods firms.
Sectoral performance
Business sentiment at 8-month high
Confidence among manufacturers improved markedly in February, with the future output index reaching its highest level since June 2025 [citation:6]. Firms expressed optimism about demand resilience, new product launches, and planned expansions in capacity. Nearly 30% of surveyed companies forecast higher output in the coming year, while only 3% predicted a reduction.
Price pressures remain contained
Input cost inflation remained moderate in February, with the rate of increase slowing from January. Some firms reported higher prices for chemicals, metals, and packaging, but overall cost pressures were below the series average. Consequently, output charge inflation was marginal, allowing companies to remain competitive in export markets [citation:3].
Equity markets reacted positively to the PMI data, with auto, capital goods, and metal stocks leading gains. The Nifty Manufacturing index climbed 1.18%, outperforming the broader Nifty50. Export-oriented sectors such as pharmaceuticals and auto ancillaries also saw buying interest on the back of strong export order flows [citation:1][citation:3].
Expert take: broad-based recovery
Economists view the February PMI as evidence that India's manufacturing sector is on a firm footing despite global headwinds. "The combination of strong domestic demand and improving exports is a sweet spot for manufacturers. Capacity utilisation is rising, and we expect private capex to gradually pick up in FY27," said Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank [citation:5].
However, some analysts caution that geopolitical risks and volatile commodity prices remain potential headwinds. The full impact of Red Sea shipping disruptions on supply chains and freight costs will need monitoring in coming months [citation:7].
Key takeaways for investors & economy
- Strongest demand in nearly a year: New orders index at 11-month high, signalling durable consumption and investment demand.
- Export resilience: New export orders at 6-month high; India gaining export share in engineering, chemicals, electronics.
- Employment uptick: Job creation at 3-month high; labour market recovery supporting consumption.
- Confidence at 8-month peak: Manufacturers planning capacity expansion, hiring, and product launches.
- Mild inflation: Input cost pressures contained, enabling stable margins and competitive pricing.
- Q4 GDP boost: Robust manufacturing likely to lift January-March GDP print; full-year FY26 growth may exceed 6.8%.
Outlook: momentum to continue
With order books swelling and inventory levels lean, manufacturers are poised to sustain production increases in March. The PMI's forward-looking indicators — new orders, exports, and future output — all point to continued expansion. The final reading for February, incorporating additional survey responses, is expected later this week; some economists project an upward revision to 57.2 [citation:7].
Disclaimer: The analysis and views are for information only. Please consult your advisor before taking investment decisions.