India's factory activity declined to an eight-month low of 56.5 in September from 57.5 in the previous month, according to the results of a private survey released on October 1.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index, which has hovered above the long-run average since the start of the fiscal, is way below the 58.2 reading recorded in the June quarter of the fiscal year.

“Momentum in India’s manufacturing sector softened in September from the very strong growth in the summer months. Output and new orders grew at a slower pace, and the deceleration in export demand growth was especially evident as the new export orders PMI was the lowest since March 2023," HSBC chief India economist Pranjul Bhandari said.

For the second quarter, manufacturing PMI averaged 57.4, the lowest since October-December 2023.

Merchandise exports remained muted in the second quarter, which also had a bearing on activity.

Data released a fortnight ago showed that merchandise exports had contracted 9.4 percent in August to $34.71 billion.

India’s infrastructure sector hasn’t performed too well either. Output in the eight core industries contracted for the first time in nearly four years by 1.8 percent in August.

Capex spending by the government was also 30 percent lower in August from the previous year.

While this is likely to keep fiscal deficit contained, economists say the government will have to ramp up spending for higher GDP growth.