India’s manufacturing sector activity witnessed a slight recovery in January, amid a faster increase in new orders, even as business confidence slipped to its lowest level in three-and-a-half years, a monthly survey said on Monday (February 2, 2026).

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI), rose from a two-year low of 55 in December to 55.4 in January.

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

“Indian manufacturing firms saw a rebound in January, driven by increased new orders, output, and employment. Input costs rose moderately, while the pace of growth in factory-gate prices eased, resulting in slight margin pressure for manufacturers,” said Pranjul Bhandari, chief India economist at HSBC.

Survey participants mentioned that demand buoyancy, new business growth and tech investment supported production.

The main impetus to overall sales came from the domestic market. However, new export business increased, but at a weaker pace. Firms that experienced an uptick cited greater demand from Asia, Australia, Canada, Europe and the Middle East.

On the job front, goods producers continued to hire extra staff. But the pace of job creation was ‘slight’, the quickest in three months.

Meanwhile, business confidence slipped to its lowest level in three-and-a-half years during January, as only 15% of companies foresee output growth in the year ahead and 83% forecast no change.

“Despite faster growth in new orders, business confidence remains muted, and expectations for future output have declined to their lowest level since July 2022,” Mr. Bhandari added.

On the price front, the survey noted that input prices rose to the greatest extent in four months, but output charge inflation retreated to a 22-month low.

“Although output charges rose, the rate of inflation was modest and the weakest in nearly two years. Many firms suggested that improved efficiency, better cost management and market rivalry prevented them from increasing their fees,” the survey said.

The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.