Page 29 - Policy Economic Report - September 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

increased banking-system liquidity, requiring the RBI to actively manage surplus liquidity through its
market operations. Recent market developments suggest that the central bank is likely to continue using
liquidity-management tools to ensure that surplus liquidity does not weaken the transmission of
monetary policy or create additional inflationary pressures.

Manufacturing and Services Activity - India PMI

India's private sector activity strengthened notably in September 2026, with the latest HSBC Flash India
PMI indicating a broad-based improvement in both manufacturing and services. The Composite PMI
Output Index rose to 56.5 in September from 54.3 in August, marking the strongest expansion in private-
sector activity since June and taking the index back above its long-run average. The improvement was led
by manufacturing, although services activity also accelerated during the month.

The manufacturing sector recorded a particularly strong improvement. The HSBC India Manufacturing
PMI increased to 55.7 in September from 52.8 in August, indicating the strongest improvement in
manufacturing operating conditions in seven months. Manufacturing output also accelerated sharply,
with the Manufacturing PMI Output Index rising to 58.2 from 54.8. Stronger output was accompanied by
faster growth in new orders, increased purchasing activity and shorter supplier lead times, pointing to
improving demand and operating conditions across the sector.

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

Source: HSBC, S&P Global PMI

Demand conditions improved across both manufacturing and services, with the increase more
pronounced among goods producers. Manufacturing sales growth reached a seven-month high,
supported by stronger demand for aluminium products, electronics, food and pharmaceutical goods, as
well as new vehicle models. Services firms also reported stronger order inflows, supported by demand for
property, transport and travel-related services, alongside growing interest in software and digital
solutions.

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