India's manufacturing growth hits five-year low as orders weaken

India's manufacturing purchasing managers' index (PMI) fell to 52.8 in August, marking the weakest expansion since 2019 and suggesting the sector's momentum is faltering. The reading, while still in expansion territory above the 50-point neutral mark, reflects a marked deceleration from previous months and underscores growing challenges facing manufacturers.

The decline was driven by softer growth in output and a notable slowdown in new orders, indicating cooling demand both domestically and potentially from external markets. Manufacturing firms reported difficulty sustaining the pace of production seen in earlier months, with constraints appearing to bite on order inflows. The deterioration in order books suggests manufacturers may face headwinds in coming months as they navigate weaker demand.

Employment figures painted an especially concerning picture, with the sector shedding jobs for the first time in two-and-a-half years. The contraction in hiring suggests manufacturers are adjusting to the weaker demand environment by cutting costs, a sign of caution about near-term prospects. Companies may be hesitant to expand headcount amid the uncertainty.

The weaker PMI reading comes at a time when India's broader economic growth has been closely watched by policymakers and investors. Manufacturing typically serves as a bellwether for industrial health, and the August data suggests the sector faces near-term challenges that could influence wider economic momentum.