Trump tariffs hit India’s manufacturing sector! PMI falls to 9-month low in November; but how big is the loss?

US President Donald Trump’s 50% tariffs on India have hit the manufacturing sector, but the impact has been somewhat cushioned by diversification to other countries. The manufacturing activity in India experienced a slowdown to a nine-month low during November, attributed to reduced sales growth and production amidst difficult market conditions, according to HSBC India Manufacturing Purchasing Managers' Index (PMI).

The HSBC India Manufacturing PMI compiles data from S&P Global, based on responses from questionnaires distributed to a panel of roughly 400 manufacturing purchasing managers.




The PMI after seasonal adjustments, declined to 56.6 in November from October's 59.2, indicating the slowest improvement in operating conditions since February. The PMI methodology indicates expansion when readings exceed 50, whilst figures below 50 signify contraction.

"India's final November PMI confirmed that US tariffs caused the manufacturing expansion to slow," said Pranjul Bhandari, Chief India Economist at HSBC.

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"Although companies suggested that the trend for international sales remained favourable – reflecting greater sales to clients in Africa, Asia, Europe and the Middle East – there was a mild loss of overall growth momentum," the report noted according to PTI.

The data showed new export orders increased at their slowest rate in more than a year.

"The export orders PMI dropped to its lowest point in 13 months. Future output expectations indicated a significant decline in November, possibly due to growing tariff-related worries," Bhandari commented.

Earlier on November 28, commerce secretary Rajesh Agrawal expressed optimism about finalising a framework trade agreement with the US within this year, which could potentially resolve tariff-related challenges for Indian exporters.

The negotiations between both nations have been ongoing, with initial expectations of concluding the first phase of a bilateral trade deal by fall of 2025. However, the implementation of tariffs on Indian exports by the Trump administration has created complications.

Whilst acknowledging that the Bilateral Trade Agreement (BTA) requires additional time, Agrawal confirmed India's continued engagement with the US in extensive discussions regarding a framework trade deal, aimed at addressing the mutual tariff issues affecting Indian exporters.

The impact of GST reductions appears to be diminishing, potentially failing to counter the negative effects of tariffs on demand, as per Bhandari's observations.

November saw a decrease in inflation levels, with both input expenses and selling prices increasing at their lowest rates in nine and eight months, respectively.

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Indian manufacturing firms adjusted their recruitment strategies and procurement activities to align with reduced growth in new orders.

The report indicated that job creation continued its positive streak for 21 consecutive months, albeit at its most modest rate during this period.

Looking forward, whilst businesses maintained optimistic projections for output over the next year, their confidence levels declined to the lowest point recorded in approximately three-and-a-half years.

"Downgraded forecasts stemmed from concerns around a competitive landscape, including competition from international firms, as anecdotal evidence showed," the report said.

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