Indian Factory Growth Slows to Two-Year Low in December Amid Weak Demand
The Indian Factory Growth has slowed sharply in December 2025, marking the lowest expansion in two years, according to a report by Reuters. The HSBC Manufacturing PMI for December declined to 55, down from 57 in November, highlighting a cooling trend in the industrial sector. Analysts attribute this slowdown to softening domestic demand, weak export orders, and cautious hiring across manufacturing industries.
Investors, policymakers, and corporate leaders are closely monitoring these numbers to assess the impact on sectors such as automotive, consumer goods, electronics, and textiles. Why is factory growth slowing now? The answer lies in inflationary pressures, reduced consumer spending, and global trade uncertainties, which are affecting production planning and output schedules.
According to industry experts, the slowdown does not indicate a crisis but reflects a period of moderation after months of strong growth. Some sectors continue to see steady demand, particularly electronics, technology, and government-driven infrastructure projects, while others like automotive components, textiles, and FMCG face reduced orders.
@CNBCTV18Live highlights the December manufacturing slowdown:
December Factory Output and Demand Trends
December’s factory output, measured by the HSBC Manufacturing PMI, fell to 55, signaling the slowest growth rate in two years. The moderation is primarily driven by:
- Soft domestic demand: Consumers are limiting purchases of non-essential goods due to inflation and cautious sentiment.
- Declining exports: Orders from major trading partners like the US and Europe have slowed amid global economic uncertainty.
- Reduced hiring: Job creation in manufacturing hit a 21-month low, reflecting companies’ caution on payroll expenses.
Why is domestic demand weaker? Analysts explain that urban consumers are postponing discretionary purchases, particularly in sectors like automotive, electronics, and luxury goods. Retailers have reported softer footfall in major cities, which has dampened factory orders.
Additionally, supply chain constraints for key inputs, such as metals and electronic components, have slowed production schedules and inventory replenishment, creating temporary operational challenges.
@mathrubhumieng shares sector-specific impacts on factory growth:
Sector-wise Analysis of Indian Factory Growth
The slowdown in Indian Factory Growth is uneven across industries:
- Automotive and Auto Components: Orders fell sharply due to weaker consumer demand and slowing exports.
- FMCG and Consumer Goods: Production growth slowed as discretionary spending moderated.
- Electronics and Technology: Maintained moderate growth, supported by government incentives and export demand.
- Textiles and Apparel: Export-driven segments experienced slower foreign orders due to global trade weakness.
Experts note that small and medium enterprises (SMEs) are particularly sensitive to these fluctuations, as tighter working capital and slower order cycles impact production planning.
@CNBCTV18News emphasizes cautious factory expansion across sectors:
Predicted Values and Market Expectations
Analysts predict Indian Factory Growth will remain subdued in early 2026. Key projected trends include:
- PMI is likely to remain in the 54-55 range if domestic demand does not improve.
- New order inflows may rise slightly to 56 by March 2026 if seasonal demand rebounds post-festive season.
- Hiring and job creation in manufacturing may gradually improve, but are likely to stay below pre-pandemic levels.
Market watchers advise investors to track quarterly corporate earnings in sectors heavily reliant on factory output, such as automotive, chemicals, and consumer goods, as factory activity directly influences profitability.
Two Key Drivers Behind the Slowdown
Domestic Consumption Weakness
- Consumers are spending cautiously, affecting growth in non-essential sectors.
- Rising inflation and living costs have forced households to delay discretionary purchases.
- Retail sales in urban areas showed a 5% YoY decline, influencing production demand.
Global Trade Uncertainty
- Export orders from the US, Europe, and the Middle East slowed significantly.
- Geopolitical tensions and trade policy uncertainties added unpredictability to manufacturing forecasts.
- Factories reported delays in shipments and cancellations of some international contracts, adding pressure to production planning.
Impact on Investors and Businesses
The slowdown in Indian Factory Growth has important implications:
- Investor caution: Stocks linked to manufacturing output may experience short-term volatility.
- Long-term opportunity: Government initiatives such as Make in India and production-linked incentives could support moderate growth later in 2026.
- AI Stock Analysis: Investors leveraging AI stock research can gain deeper insights into sector-specific trends and production forecasts, optimizing portfolio decisions.
Key Takeaways for the Market
- Indian factories are operating in a period of moderation with slower order inflows.
- Consumer spending patterns and global trade trends remain the primary drivers of manufacturing output.
- Investors and businesses must monitor monthly PMI updates, export order flows, and domestic consumption trends to anticipate market movements.
- Certain sectors, particularly electronics and government-linked industries, continue to show resilient growth, providing potential investment opportunities.
December Factory Data Snapshot
- HSBC Manufacturing PMI: 55 in December 2025, down from 57 in November
- Job creation: 21-month low, indicating cautious hiring
- Domestic demand: Weakest in two years, particularly for non-essential goods
- Export orders: Declined moderately due to global uncertainty
- Inflation impact: Rising input costs affected margins and output decisions
Early 2026 Predictions
- PMI forecast: 54-55 in Q1 2026 if trends persist
- New orders: Potential modest rise to 56 by March 2026
- Sector growth: Electronics and technology are likely to maintain moderate expansion
- Hiring trend: Gradual recovery expected, below pre-pandemic levels
- Investor outlook: Cautious with opportunities in resilient sectors
Conclusion
The Indian Factory Growth slowed to a two-year low in December, highlighting cautious business sentiment amid weak domestic demand and soft export orders. While some sectors maintain growth, the overall manufacturing environment is moderating. Investors should monitor monthly PMI releases, government policy updates, and sector-specific trends to identify both risks and opportunities.
This period may represent a strategic window for long-term investments, particularly in resilient sectors like electronics, technology, and government-supported manufacturing, even as short-term volatility persists.
FAQ’S
Weak domestic demand, declining exports, and cautious hiring contributed to the slowdown.
Automotive, FMCG, textiles, and export-oriented sectors saw the most impact, while electronics maintained moderate growth.
Investors may experience short-term stock volatility in manufacturing-linked sectors, but long-term opportunities exist as policies stabilize production.
PMI is expected to hover between 54-55, reflecting cautious but stable growth.
Disclaimer
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.
