India’s manufacturing sector experienced a significant slowdown in November, though it continues to maintain expansionary conditions. The HSBC India Manufacturing PMI eased to 56.6 from October’s 59.2, representing the slowest pace of growth since February. This decline was primarily driven by the sharp impact of US 50% tariffs on exports and the waning effects of GST rate cuts implemented earlier.

New export orders took the hardest hit, plummeting to a 13-month low, reflecting the challenging external demand environment. According to Pranjul Bhandari, Chief Economist at HSBC India, the November PMI figures confirm that US tariffs have significantly slowed manufacturing expansion. While GST rate cuts provided some stimulus, this boost appears to have faded and may be insufficient to counteract the tariff headwinds affecting demand.

Despite these headwinds, manufacturing activity remains firmly in expansion mode. Factory output continued to expand, though at the softest pace since May, indicating growth is still present but decelerating. Many manufacturers reported substantial improvements in their order books, attributing this to competitive pricing strategies, favorable demand trends, and increased client interest. However, the overall rate of growth moderated to a nine-month low due to challenging market conditions and increased competition among firms.

A notable bright spot emerged in the pricing dynamics. Input cost inflation and output price increases both hit their lowest levels in nine and eight months respectively, suggesting easing inflationary pressures. This provides some relief to both manufacturers and consumers. On the employment front, manufacturers adjusted their hiring efforts in line with softer new order growth, resulting in employment expansion at its weakest pace in the current 21-month period of uninterrupted growth.

Manufacturers noted that while overseas sales trends remained favorable, with increased sales to clients across Africa, Asia, Europe, and the Middle East, the overall momentum was blunted. Business confidence showed a notable decline, reaching its lowest level since mid-2022, likely reflecting growing concerns about the broader impact of tariff policies on future demand and business operations.

Looking ahead, economists expect India’s Manufacturing PMI to reach 59.60 points by the end of this quarter. Long-term projections suggest PMI will hover around 55.00 points in 2026 and decline slightly to 53.00 points in 2027. While growth is decelerating, the sector remains above its long-run average of 54.2 points, demonstrating underlying sector resilience despite current headwinds.