Page 28 - Policy Economic Report -August 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

Going forward, the RBI's policy trajectory is likely to remain closely dependent on incoming data,
particularly the evolution of food and core inflation, crude oil prices, domestic demand, liquidity
conditions and global financial developments.

Manufacturing and Services Activity - India PMI

India's private sector activity strengthened marginally in August 2026, following the slowdown recorded
in July, as an improvement in services activity more than offset a further loss of momentum in
manufacturing. According to the HSBC Flash India PMI, the Composite PMI Output Index rose to 54.6 in
August from 54.3 in July, signaling a faster expansion in overall private sector output. However, the latest
reading remained the second-weakest since March 2022, indicating that while economic activity
continued to expand, the pace of growth remained relatively subdued compared with the stronger
expansion seen in recent years.

The improvement in August was primarily driven by the services sector, with the Services PMI Business
Activity Index increasing to 54.5 in August from 53.3 in July. Services firms recorded a modest re-
acceleration in both business activity and new work after registering their weakest upturns in more than
four years during July. In contrast, manufacturing activity weakened further, with the Manufacturing PMI
declining for the third consecutive month to 52.9 from 53.5, while the Manufacturing PMI Output Index
fell sharply to 54.9 from 56.4. Manufacturing production and new orders recorded their weakest increases
in five years, pointing to a loss of momentum in the factory sector.

Figure 13: HSBC India Composite PMI Output Index and GDP Growth (2013–2026)

Source: HSBC, S&P Global PMI

Despite the moderation in manufacturing, overall new business volumes increased at a slightly faster pace
during August. However, the pace of growth remained subdued relative to historical trends, with
companies citing challenging market conditions, competitive pressures and lower customer requirements
as constraints on new orders. Export orders continued to increase solidly across the private sector, with
firms reporting stronger demand from a diverse range of markets including the United States, Germany,

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