What Happened
- India's Manufacturing Purchasing Managers' Index (PMI) rose to 56.9 in February 2026, up from 55.4 in January — the highest reading in four months (since October 2025).
- The flash estimate had pegged the reading at 57.5; the final figure was revised slightly downward but remains well within expansion territory.
- The upturn was driven primarily by a substantial improvement in domestic new orders, which reached their strongest level since October 2025.
- Production expanded in line with rising order books, and employment increased for the fourth consecutive month, at the quickest pace in four months.
- Backlogs of work grew at a seven-month high, indicating that manufacturers were unable to clear all incoming demand immediately, which in turn supported additional hiring.
- Business confidence about the year ahead improved to a four-month high, pointing to robust optimism despite external headwinds.
- The one weak spot was new export orders, which grew at their slowest pace in 17 months, reflecting global demand uncertainty — particularly concerns around US tariff policy.
- The index is compiled by S&P Global for HSBC, based on survey responses from purchasing managers across Indian manufacturing firms.
Static Topic Bridges
Purchasing Managers' Index (PMI): Concept and Methodology
The PMI is a composite leading economic indicator derived from monthly surveys of purchasing managers in the manufacturing (and separately, services) sector. A reading above 50 signals expansion relative to the previous month; below 50 signals contraction; 50 indicates no change. It is widely tracked by central banks, governments, and investors because it provides timely, forward-looking signals about economic momentum ahead of official GDP data.
- The Manufacturing PMI is composed of five sub-indices with the following weights: New Orders (30%), Output (25%), Employment (20%), Suppliers' Delivery Times (15%), and Stocks of Purchases (10%).
- Delivery times are inverted in the calculation — longer delivery times (indicating supply strain) are counted as a positive signal of demand strength.
- In India, the HSBC Manufacturing PMI is compiled by S&P Global through surveys of approximately 400 manufacturing firms.
- The index covers the following sectors: basic metals, chemicals and plastics, electricals and electronics, food and drink, mechanical engineering, and textiles.
- India's PMI has been in expansion territory (above 50) consistently since mid-2021, reflecting sustained post-pandemic manufacturing momentum.
Connection to this news: The February reading of 56.9 — well above the 50-threshold — signals robust expansion. The strength of the domestic orders sub-index points to resilient consumer demand as the growth engine, even as the export orders component flashes caution.
Make in India and Industrial Policy
Launched in 2014, Make in India is a flagship government initiative aimed at transforming India into a global manufacturing hub, raising manufacturing's share of GDP from approximately 16 percent to 25 percent, and creating 100 million additional jobs by 2022. The initiative targets 25 broad sectors, including defence, automobiles, electronics, pharmaceuticals, and textiles.
- India's manufacturing sector contributes approximately 16-17 percent of GDP, significantly below the 25-30 percent seen in East Asian manufacturing-led economies like China, South Korea, and Vietnam.
- Production Linked Incentive (PLI) schemes — launched across 14 sectors since 2020 — offer financial incentives to companies meeting incremental sales targets, designed to boost domestic manufacturing capacity.
- The National Manufacturing Policy (2011) set the original target of raising manufacturing's GDP share; Make in India operationalised this through ease of doing business reforms.
- Infrastructure bottlenecks, land acquisition challenges, and skill gaps remain structural constraints to manufacturing scale-up.
Connection to this news: A sustained PMI above 55 — as seen through much of 2025-2026 — reflects the gradual success of these policies in building domestic manufacturing momentum, particularly in domestic demand-driven sectors. The export order weakness, however, highlights that India has not yet achieved the export-oriented manufacturing depth seen in East Asian economies.
India's Economic Resilience Amid Global Uncertainty
India has positioned itself as one of the fastest-growing major economies globally, with GDP growth projections in the range of 6.5-7 percent for 2025-26. Strong domestic consumption, a young demographic, and government capital expenditure have been the main growth drivers. At the same time, global headwinds — including trade policy uncertainty, geopolitical conflicts, and commodity price volatility — pose external risks.
- The RBI projects India's GDP growth at approximately 6.7-6.8 percent for 2025-26.
- India's domestic consumption — driven by a rising middle class of over 300 million people — has proven more resilient than export-oriented sectors in recent quarters.
- US tariff threats and global supply chain restructuring create both risks (export slowdown) and opportunities (supply chain diversification away from China) for Indian manufacturers.
- Core sector output — comprising coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity — is a key indicator tracked alongside PMI.
Connection to this news: The February PMI data reinforces India's domestic demand resilience narrative. The slowing export orders sub-index is a signal worth watching — if US tariff uncertainty crystallises into actual trade restrictions, India's manufacturing sector's export ambitions could face headwinds.
Key Facts & Data
- February 2026 Manufacturing PMI: 56.9 (final); flash estimate was 57.5
- January 2026 Manufacturing PMI: 55.4
- October 2025 PMI: Previous four-month high (baseline for comparison)
- Threshold for expansion: 50.0
- New Orders sub-index: Highest since October 2025 (domestic demand-driven)
- Export Orders sub-index: Slowest growth in 17 months
- Employment: Rose for 4th consecutive month; fastest pace in 4 months
- Backlogs of work: Grew at a 7-month high
- Business confidence: Improved to a 4-month high
- PMI compiler: S&P Global for HSBC
- India's manufacturing GDP share: ~16-17 percent (target: 25 percent under Make in India)