India's manufacturing sector expansion softened to its slowest pace in nine months during November 2025, according to a key private survey, with analysts pointing to the impact of steep US tariffs on demand. The latest data highlights the emerging external headwinds for one of the world's fastest-growing economies.
PMI Data Shows Clear Slowdown
The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 56.6 in November 2025 from 59.2 in October. This marks the weakest expansion since February 2025. A PMI reading above 50 indicates growth in activity.
Pranjul Bhandari, chief India economist at HSBC, stated that the final November PMI confirmed that US tariffs caused the manufacturing expansion to slow. She highlighted that the sub-index for new export orders dropped to a 13-month low, directly linking the deceleration to trade pressures.
Tariff Impact and Fading Domestic Boost
The manufacturing sector has faced significant pressure following a series of aggressive US tariffs on a broad range of Indian exports. Washington imposed a 25% tariff on almost all Indian goods in August 2025, followed by an additional 25% levy later that same month, intended as a penalty for New Delhi's purchase of discounted Russian oil.
According to SBI Capital Markets' EcoCapsule, India is among the nations hardest hit by these US tariffs, facing an effective duty burden of approximately 50% since late August.
Bhandari further noted that the positive boost from recent cuts in the Goods and Services Tax (GST) may be fading and might be insufficient to offset the tariff-induced headwind to demand. Business confidence, reflected in future output expectations, showed a significant fall in November, potentially due to rising concerns about tariffs.
Confidence Dips and Global Competition
While companies remained confident about rising output over the next year, the level of positive sentiment plunged to its lowest in nearly three-and-a-half years. Anecdotal evidence from the survey indicated that downgraded forecasts stemmed from worries about a competitive landscape, including competition from international firms.
On a slightly positive note, the survey found no pressure on the capacity of Indian manufacturers and their suppliers in November. Volumes of outstanding work among goods producers were broadly unchanged from October, and vendor performance continued to improve.
Resilience Amidst Global Headwinds
Despite the export slowdown, the survey noted that companies reported the trend for international sales remained favourable, driven by greater sales to clients in Africa, Asia, Europe, and the Middle East. However, there was a mild loss of overall growth momentum, with new export orders rising at the weakest pace in over a year.
Rishi Shah, partner and economic advisory services leader at Grant Thornton Bharat, underscored the underlying resilience. "The latest PMI reading underscores that India’s manufacturing engine remains resilient: domestic demand continues to be underpinned by strong festive-season consumption and the tailwinds from recent GST rate cuts," he said.
These structural supports have driven increases in new orders, inventories, and output, supporting jobs and near-term confidence. Shah cautioned, however, that with global demand softening, downside risks from external headwinds—including volatile commodity prices and weaker global growth—cannot be ignored.
Contrast with GDP and Future Outlook
This moderation in manufacturing growth comes at a time when India's year-on-year GDP growth unexpectedly accelerated to a six-quarter high of 8.2% in Q2 of the 2025-26 fiscal year, up from 7.8% in the previous quarter. This robust performance defied expectations of a slowdown.
Nevertheless, with manufacturing showing signs of cooling, expectations are building that GDP growth will slow in the coming quarters. Looking ahead, an adverse base effect, the potential negative impact of US tariffs, and limited headroom for government capital spending may dampen the growth pace from the robust 8.0% seen in the first half of FY26.
Despite these challenges, ratings agency ICRA has stated that the real GDP expansion for FY26 now appears set to print at 7.4%, indicating sustained, though moderating, economic strength.
