There was only a modest increase in the performance of private sector operations in India in August 2026, mainly because of the growth in the services sector. As per the flash report, the HSBC Flash India Composite Output Index moved up to 54.6 in August from 54.3 in July, which had been the lowest level in 52 months.

However, even with this modest increase in the pace of activity, the index figure of 54.6 remained the second-lowest figure in five months since March 2022. This is an indicator that the total demand for the wider economy remains relatively muted despite a modest upturn in economic activity from the pronounced downward shift of the previous month.

Divergence and persistent strength

Rebound effects were not equally distributed and could be distinguished by service and manufacturing activities. Services were the primary growth driver for the month, with both business activity and new orders accelerating from July’s lows for the first time in five years. 

However, in the case of the manufacturing sector, signs of weakening could be clearly witnessed. The HSBC Flash India Manufacturing PMI fell to 52.9 for the third month running in August. It was the widest manufacturing deceleration in five years, reflecting a broad continuing slowdown in industrial production.

On the commercial side, total new orders to private firms rose slightly faster than in July. International trade remained a positive feature, and export order activity continued to provide solid expansion. 

Strong foreign demand was buoyed by exports from major global and regional markets such as the United States, Germany, China, Singapore and Japan. Continuing orders for goods and services from abroad supported private sector firms more strongly than domestic market conditions.

Inflation trends and employment disparity

Employment growth in the private sector climbed sharply in the month, as the overall employment increase rate edged to its best performance since June 2025. Hiring also had a pronounced level of sector specificity, similar to that found in output trends. 

Organizations filled their ranks in the services sector, hiring to maintain pace with fresh orders. There was a decrease in manufacturing employment in August, making it the first such decrease in two-and-a-half years.

Analysis of cost indicators showed that input costs and selling costs are moving in opposite directions. Cost inflation slowed materially, dropping to a seven-month low to provide relief to operational costs. Despite this cooling of input cost inflation, output price inflation accelerated. 

The rate of overall charge inflation was accelerating at an increased rate since April, as companies pushed up charges to clients. Business confidence among private sector companies improved in August. Optimism at the company level has risen, as executives look forward to a stronger overall market environment over the next year.

Conclusion

Private sector growth revitalized slightly in August after a multi-year low in July, the latest survey results indicate. The momentum came mainly from the recovery in the services sector that offset the continued slowdown in the manufacturing sector, where output growth dropped to its lowest level in five years, and employment fell for the first time in two-and-a-half years.

Encouraged by robust demand for exports from foreign trade partners, substantial hiring in the service sector, and reduced input prices, business confidence in the country closed the month with optimism for the coming year.