India's manufacturing activity grew in August at its weakest rate in five years as demand stayed subdued, resulting in job cuts for the first time in over two years, according to a survey.

The HSBC India Manufacturing Purchasing Managers' Index (PMI), prepared by S&P Global, declined to 52.8 in August from 53.5 in July, coming in marginally below the preliminary reading of 52.9.

A PMI reading above 50.0 indicates growth in activity.

Asia's third-largest economy grew 7.8% year-on-year in the April–June quarter, driven by strong investment and solid manufacturing performance. However, the survey suggests that growth will likely slow to 6.6% in the current quarter.

New orders increased at their weakest rate since August 2021, as companies cited difficult market conditions and subdued demand for certain products. Export orders also expanded, but the growth in international demand slowed compared with July.

Production continued to grow but at its slowest rate in five years. Underscoring a more cautious outlook, factory employment declined for the first time in 30 months, although the reduction was only slight.

Cost pressures moderated as input price inflation declined to its lowest level in six months. Consequently, companies kept increases in their selling prices in check, with output charge inflation dropping to its weakest point in 45 months and slipping below its long-run average.

Despite the widespread slowdown, business confidence ticked up and reached its highest level since May, though overall sentiment remained muted compared with historical norms.