India’s Manufacturing PMI Slips to 56.6 as US Tariffs Tariff Pressures Bite; Markets Eye RBI Policy Shift Amid Cooling Output

Mumbai | December 1 – India’s manufacturing sector lost momentum in November, with fresh data signalling the sharpest cooling in production and demand since early 2024. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) slipped to 56.6 from October’s 59.2 reading—still well above the expansion threshold of 50, but marking the slowest improvement in operating conditions in nine months.

The softening comes against a delicate backdrop. Producers are grappling with a dual headwind: tariff-driven pressure from the United States and a noticeable moderation in global demand. Domestic orders remained healthy, but the pace has eased, prompting firms to recalibrate hiring, pricing and output strategies heading into the final quarter of FY26.

Survey respondents reported continued increases in output and new orders, yet both categories expanded at their weakest levels since February. Companies cited rising international competition, elongated project timelines and more cautious purchasing patterns from both domestic and overseas clients. Export data added to the concerns—growth in new export orders slipped to a 13-month low despite steady business from Africa, the Middle East and parts of Asia. The deceleration indicates the early transmission of US tariffs through supply chains, softening external demand for Indian manufacturers.

Adding another layer of caution to the outlook, official data shows India’s Index of Industrial Production (IIP) sharply tapered.
“India’s IIP rose just 0.4% in October, down from 4% in September. While the government notes that festival-related holidays reduced working days, the broader moderation reflects the early impact of tariff-driven headwinds,” said Vikram Kasat, Head of Advisory at PL Capital.

Business Confidence Slips to Multi-Year Lows

The PMI’s Future Output Index a forward-looking gauge of sentiment fell to its lowest point in nearly three-and-a-half years. Surveyed firms expressed growing concerns about the competitive landscape, particularly from global peers who are aggressively pricing into softening markets. This caution has led to subdued hiring, with most companies taking on staff only for essential or strategic functions.

Manufacturers are also contending with limited pricing power. Easing input cost inflation has left firms with little room to pass on incremental costs, pushing the Selling Charges Index to an eight-month low. Many producers opted to absorb part of the cost burden to preserve market share, reinforcing the margin pressures already building across the sector.

The latest data arrives ahead of a closely watched meeting of the Reserve Bank of India’s Monetary Policy Committee (MPC), scheduled for December 3–5. While markets had largely priced in a 25-basis-point rate cut due to benign inflation—CPI has slipped below the RBI’s lower tolerance band of 2%—last week’s robust GDP growth print of 8.2% may prompt the central bank to maintain a wait-and-watch stance.

Outlook: Solid Foundation, Rising Pressure

Despite November’s loss of steam, India’s PMI reading remains well above its long-term average of 54.2, underscoring the underlying strength of the country’s manufacturing base. However, the convergence of tariff friction, softer export orders and constrained pricing ability raises the risk of a prolonged moderation extending into the early months of 2026.

Investors will closely track developments in trade diplomacy, particularly the anticipated first tranche of the India-US bilateral agreement expected by late 2025. A favourable framework could ease the tariff burden, revive export momentum and offer much-needed relief to manufacturers navigating an increasingly complex global demand environment.