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New Delhi: India's manufacturing sector growth moderated in August as output and sales rose at slowest rates since January, while competitive pressures and inflation concerns hampered business confidence, a monthly survey said on Monday.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) stood at 57.5 in August, below July's reading of 58.1 but above its long-run average of 54.0, signalling a substantial improvement in operating conditions.

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In PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

"The Indian manufacturing sector continued to expand in August, although the pace of expansion moderated slightly. New orders and output also mirrored the headline trend, with some panellists citing fierce competition as a reason for slowdown," Pranjul Bhandari, Chief India Economist at HSBC, said.

According to the survey, new business rose sharply through the second quarter of the fiscal year, but the pace of expansion eased to a seven-month low.

New export orders, likewise, increased at the weakest pace since the start of the 2024 calendar year.

On the prices front, goods producers benefited from a moderation in cost pressures during August.

"On a positive note, the rise in input costs slowed sharply. Manufacturers increased their raw material buying activity in order to build safety stocks. In line with input costs, the pace of output price inflation also decelerated, but the deceleration was to a much smaller extent, thereby increasing margins for manufacturers," Bhandari added.

The survey further noted that job creation softened midway through the second fiscal quarter as a few firms trimmed headcounts. Nevertheless, the overall rate of employment growth was solid in the context of historical data.

According to the survey, business confidence retreated and panelists were at their least optimistic level since April 2023.

"Business outlook for the year ahead moderated slightly in August, driven by competitive pressures and inflation concerns," Bhandari said.

Meanwhile, India's economic growth slowed to a 15-month low of 6.7 per cent in April-June 2024-25, mainly due to poor performance of the agriculture and services sectors, government data showed on Friday.

The gross domestic product (GDP) expanded 8.2 per cent in the June quarter of 2023-24.

S&P Global compiles the HSBC India Manufacturing PMI from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.

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