India’s factory growth slows to nine-month low as US tariffs dent demand, PMI shows

BENGALURU: India’s manufacturing sector lost some momentum in November with growth decelerating to a nine-month low as stiff U.S. tariffs took a heavy toll on demand, a survey showed on Monday.

The downbeat outcome puts a dampener on Asia’s third-largest economy which grew at a faster-than-expected pace of 8.2% last quarter, according to government data released on Friday. Manufacturing posted robust growth in the July-September quarter, though its likely to have slowed down this quarter as the Trump administration’s hefty tariffs bite.

HSBC’s India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, dropped to 56.6 last month from October’s strong reading of 59.2 and below the preliminary reading of 57.4.

Still, the figure remained above the 50.0 threshold separating expansion from contraction for the 53rd consecutive month, registering the longest growth streak since the survey began in March 2005.

The latest slowdown was evident across key indicators. Both factory output and total new orders - a gauge for demand - expanded at their weakest pace since February, a trend attributed to challenging market conditions, project commencement delays, and rivalry among firms.

India’s November business growth slows to 6-month low on weak manufacturing, PMI shows

Of particular concern was tariffs imposed by Washington, although the survey did not mention exports to the U.S., the largest trading partner. International demand sputtered with new export orders posting the weakest expansion in over a year, despite sustained sales growth to clients across Africa, Asia, Europe, and Middle East

Government data recently showed a record high trade deficit with exports to the U.S. falling nearly 9% year-on-year hurt by the 50% punitive tariffs on Indian imports.

“India’s final November PMI confirmed that U.S. tariffs caused the manufacturing expansion to slow,” noted Pranjul Bhandari, chief India economist at HSBC.

“Business confidence, as indicated by expectations for future output, showed a big fall in November, potentially reflecting increasing concerns about the impact of tariffs. The boost from the cuts in goods and services tax (GST) may be fading and it might be insufficient to offset the tariff headwind to demand.”

While the rate of job creation was the softest in 21 months, the business confidence sub-index on future output plummeted to its lowest level since mid-2022 driven by concerns over the increasingly competitive landscape, including pressure from international firms.

Cooling price pressures were a bright spot. Input cost inflation was at its weakest in nine months, providing manufacturers with the leverage to limit price hikes. Output charges were the softest recorded since March.

That will help the Reserve Bank of India cut its key repo rate by 25 basis points to 5.25% at its meeting this week amid record low consumer inflation.