Page 27 - Policy Economic Report- June'26

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

The Manufacturing PMI eased to 54.5 from 55.0 in May, while the Manufacturing Output
Index moderated to 57.4 from 58.0. Although new orders continued to expand, the pace of growth slowed
as firms reported competitive pressures, rising fuel prices, gas shortages, and softer domestic demand.
Export orders increased at their weakest pace since March 2023, and purchasing activity rose at the
slowest rate in nearly two-and-a-half years, resulting in slower inventory accumulation. Despite these
headwinds, manufacturers remained optimistic about future output, supported by resilient order books
and continued infrastructure-led demand.

Figure 15: HSBC India Manufacturing PMI

June 2026 Source: HSBC, S&P Global PMI

The Services PMI Business Activity Index also moderated to 57.3 from 59.8 in May, recording its slowest
pace of expansion since January 2025. Business activity continued to be supported by healthy domestic
demand and growth in international sales; however, firms reported increased competition and softer
demand conditions that slowed the pace of new business inflows. Employment continued to expand,
although hiring growth weakened to its slowest pace since December 2025, reflecting greater caution
among businesses amid an uncertain external environment.

India’s external position

Foreign Exchange Reserves

India's foreign exchange reserves remained robust during June 2026, providing a strong buffer against
external shocks arising from heightened geopolitical tensions, volatile global financial markets, and
fluctuations in international commodity prices. Healthy reserve levels continued to strengthen investor
confidence, support exchange rate stability, and enhance the country's ability to meet external payment
obligations. The accumulation of reserves reflects sustained capital inflows, prudent external sector
management, and the Reserve Bank of India's continued focus on maintaining adequate liquidity in the
foreign exchange market.

Page | 26