Manufacturing activity in India witnessed a slowdown, reaching an 18-month low in December, according to a survey released on Wednesday. The HSBC India Manufacturing Purchasing Managers Index (PMI) dipped from 56 in November to 54.9, signaling a notable improvement in the sector's health despite the decline. Business confidence for the upcoming months remained strong, suggesting a resilient outlook.

Although the overall PMI reading was above the long-term trend, it contributed to the lowest quarterly average (55.5) since the first quarter of the fiscal year 2022-23. The index, where the 50-point mark separates expansion from contraction, reflected a softening in the rate of expansion of new orders. The survey, based on responses from around 400 manufacturers' purchasing managers, highlighted a moderation in growth for both output and new orders.

Pranjul Bhandari, Chief India Economist at HSBC, explained that while new business gains, favorable market conditions, and events contributed to increased manufacturing production in December, the rate of expansion was the slowest since October 2022. The survey also noted that the future output index rose compared to November, and rates of increase in input and output prices remained broadly unchanged.

Despite the recent deceleration, the manufacturing sector in India continued to expand in December, albeit at a softer pace, pointing towards the resilience of the industry. The moderation in growth was attributed to diminishing demand for specific product types.