India’s private-sector activity continued to expand in October, supported by higher new orders, with the services sector leading the improvement. The HSBC Flash India PMI Composite Output Index, a weighted average of the manufacturing and services PMIindices, rose to a four-month high of 56.7 in October from 55.9 in September. However, the pace of expansion remained below the average recorded so far in 2026. 

Improving market conditions and higher new orders supported output growth. Total new business accelerated in October, aided by the fastest increase in new export orders in six months. Despite the sharp rise in output and new orders, companies remained cautious about hiring. Employment increased only marginally in October, at the slowest pace so far this year.

In manufacturing, slower job creation contributed to a moderation in the HSBC Flash India Manufacturing PMI to moderate to 54.9 in October from 55.1 in September. Growth in purchasing activity also eased to its slowest pace in the current cycle, which began in July 2021. Nevertheless, stocks of purchases rose sharply, recording their largest degree in eight months, amid shorter supplier delivery times. Stocks of finished goods also increased as companies built inventories to meet the higher demand. The rate of expansion in finished goods inventories was the sharpest on record.

The HSBC Flash India Services PMI rose to a four-month high of 56.2 in October from 55.2 in September. However, flash PMI readings tend to be marginally higher than the final readings.

Growth in India’s core industries accelerated to a record 7.9% in September from 5.9% in August, driven by double-digit growth in output of coal, refinery products, electricity, and iron ore sectors. The new series of the Index of Core Industries, introduced in July, provides historical growth data only from April 2024.

Coal output growth rebounded to 10.7% in September from a contraction of 3.8% a month earlier. Iron ore output growth accelerated to 18.4% from 5.5%, while refinery products output growth rose to 10.3% from 5.6%. Electricity generation grew 11.4% in September, moderating from 13.1% in August.

Crude oil output contracted for the 21st consecutive month, natural gas output for the 27th month, and fertiliser output for the seventh month in September.

Cement and steel production, which have supported growth in the core sector in recent years, increased grew 9.8% and 4.9%, respectively, in September.

The Index of Core Industries comprising nine sectors – coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, electricity, and iron ore – account for 32.88% of the weight of the Index of Industrial Production.

Net foreign direct investment in India moderated $3.33 billion in August from $7.34 billion a month earlier, primarily on account of a decline in gross FDI and an increase in repatriation. Gross FDI in August fell to $11.07 billion in August from a 71-month high of $14.58 billion in July. FDI repatriation in August rose to $5.83 billion from $3.84 billion a month earlier. Overseas investments by Indians declined to $1.92 billion from $3.40 billion in July.

Overall foreign investment flows moderated $5.07 billion in August from more than five-year high of $11.46 billion in July. Net portfolio investment was $1.74 billion in August, down from $4.11 billion a month earlier.

Net FDI inflows in April-August rose 43.3% year-on-year to $13.79 billion, while gross FDI inflows increased 20.6% to $54.93 billion.

The rupee’s real effective exchange rate rose in September, driven by higher domestic inflation relative to major trading partners and the rupee’s appreciation in nominal effective exchange rate terms. The 40-currency trade-weighted real effective exchange rate index rose to 92.24 in September from 91.96 a month earlier.

The latest data indicated that the rupee remained relatively undervalued against the currencies of its major trading partners. The rupee depreciated 0.7% against the dollar in September as tensions in West Asia and high crude oil prices weighed on the Indian currency. The strong Foreign Currency Non-Resident (Bank) deposit inflows limited the decline in the rupee.

India’s foreign exchange reserves continued to decline amid the Reserve Bank of India’s intervention in the foreign exchange market to support the rupee. Reserves fell by $5.01 billion to $721.02 billion in the week ended October 16, marking the sixth consecutive weekly decline. They fell by a cumulative $64.69 billion over this period. Foreign currency assets declined by $5.76 billion to $591.85 billion, while gold reserves increased $706 million to $105.80 billion during the week. 

Water storage in key reservoirs continued to fall, widening the gap with historical levels. As of October 22, live storage in the country’s 178 reservoirs stood at 123.23 billion cubic metres, or 67% of their total capacity. Storage was 26% below the year-ago level and 18% below the 10-year average. Deficient southwest monsoon rainfall and low reservoir storage are likely to affect rabi crops, which typically depend on irrigation.

The northeast monsoon has got off to a slow start, with rainfall deficient in most parts of the country so far. Cumulative rainfall across the country stood at 27.9 millimetres as of October 23, equivalent to 44% of the long-period average. Rainfall in the core region, where the northeast monsoon is most active, was 80% of the long-period average at 102.2 millimetres. The core region comprises Coastal Andhra Pradesh, Rayalaseema, Tamil Nadu and Puducherry, South Interior Karnataka and Kerala.

India’s rabi sowing started slowly, with sown area sharply lower on year. The total area sown under rabi crops was 1.80 million hectares as of October 23, down 36.3% from a year ago. Rice acreage declined 52.1% to 0.10 million hectares, while wheat declined 59.3% to 0.01 million hectares. Area under pulses declined 25.5% to 0.33 million hectares, while that under oilseeds was 1.34 million hectares, down 37.3% from a year ago. The area sown so far accounted for 2.8% of the normal rabi area of 64.47 million hectares.

Coming up

• October 28: Index of Industrial Production for September
• October 30: Government finances for April-September
• November 2: HSBC India manufacturing PMI for October 

Tailpiece
Foreign tourist arrivals in India declined 8% to 9.15 million in 2025. The decline was driven by a sharp reduction in arrivals from Bangladesh amid political turmoil and social unrest there. Foreign tourist arrivals from Bangladesh fell by 73.2% to 0.47 million in 2025.