India manufacturing growth slows to five-year low in August

India's manufacturing sector experienced a slowdown in August, with the HSBC India Manufacturing Purchasing Managers Index (PMI) falling to 52.8 from 53.5 in July. This marks the third consecutive month of decline and represents a five-year low in growth momentum. While the index remains above 50, indicating continued expansion, the pace of production and new orders has decelerated due to weak demand and market uncertainty.

The slowdown has impacted employment, with the manufacturing sector seeing a slight decline in headcount for the first time in approximately two and a half years. Additionally, companies reported an increase in finished goods inventories due to lower-than-expected sales.

In contrast to the manufacturing slowdown, other economic indicators show strength. August GST collections rose approximately 15% year-on-year to nearly 2 lakh crore rupees, marking the third consecutive month of double-digit growth. Digital payments also saw significant activity, with UPI transactions surpassing 24 billion for the first time. Automobile sales also showed robust growth, contributing to a resilient broader economic picture despite the cooling manufacturing sentiment.