India’s manufacturing sector recorded its fastest growth in over 17 years in August, driven by strong domestic demand, even as international sales weakened under pressure from rising US tariffs, according to the latest survey by S&P Global.

The Purchasing Managers’ Index (PMI) for manufacturing climbed to 59.3 in August, up from 59.1 in July, indicating the sharpest improvement in operating conditions since early 2008. The PMI is based on a monthly survey of around 400 manufacturers across the country.

“Indian manufacturing growth gained further momentum in August, with ongoing improvements in demand continuing to underpin robust increases in factory orders and production,” S&P Global said in its report.

Production volumes expanded at their fastest pace in five years, with the intermediate goods segment leading growth, followed by capital goods and consumer goods.

However, international sales growth fell to a five-month low, weighed down by concerns over the increase in US tariffs on Indian goods to 50 per cent.

“American buyers appear to be holding back amid uncertainty, contributing to slower export order growth,” said Pranjul Bhandari, Chief India Economist at HSBC.

Nonetheless, overall order growth remained resilient, thanks to robust domestic demand, which helped offset the impact of external trade pressures.

“Manufacturers’ continued optimism for future output is a positive sign,” Bhandari added.

The survey also reported job creation for the 18th consecutive month, though the pace in August was the weakest since November 2024.

Manufacturers ramped up raw material and semi-finished goods purchases, driven by rising output needs and stock replenishment. Business confidence also rebounded, recovering from July’s three-year low, supported by expectations of continued growth in output over the next 12 months.

Capacity pressures remained minimal, with only a marginal increase in outstanding business volumes. Firms noted improved supply chain conditions, with lead times shortening more sharply than in July, signalling a smoother flow of input materials.