India’s Manufacturing Sector Sees Slowest Growth in Nine Months

India’s manufacturing industry has recorded its weakest growth in nine months, primarily driven by decreased demand linked to U.S. tariffs.

The latest report highlighted a decline, with growth dropping to 0.4% in October, compared to a robust 8.2% in the previous quarter, which is noticeably lower than the anticipated 3.1%. Manufacturing production also fell to 1.8% from 4.8% in September, while both mining and energy sectors experienced declines as well.

The figures for October were particularly disheartening, especially after efforts to reduce the Goods and Services Tax (GST) were made to boost domestic consumption and mitigate the effects of U.S. tariffs.

On a somewhat positive note, the revised tax system has led to an increase in government revenue. This uptick should help quell concerns about reduced tax revenue from lowered rates. However, it seems the increase from consumer spending due to the tax cuts hasn’t fully compensated for weaker export demand resulting from the tariffs.

According to Pranjul Bhandari, Chief India Economist at HSBC Bank, the latest PMI data has illustrated that U.S. tariffs are impacting the pace of manufacturing growth, noting that new export orders have dropped to a 13-month low. He said, “Business confidence, reflected in expectations for future production, saw a notable dip in November, likely due to rising worries about tariff impacts.”

Bhandari also mentioned that the positive effects of the GST cut might be diminishing and could struggle to counteract the downward pressure from customs duties.

Some analysts, however, commended the resilience of India’s manufacturing sector, suggesting that business confidence remains fairly stable, particularly if GDP growth does not decline drastically in the upcoming quarter. Many economists believe India’s GDP might rebound early next year, projecting a growth of at least 7% by 2026.

Indian Commerce Secretary Rajesh Agarwal recently stated that India aims to finalize the first part of a trade agreement with the United States by late 2025. He indicated a more immediate trade framework to lower tariffs could be established before the comprehensive bilateral agreement—aimed at completely removing tariffs and possibly doubling trade—reaches completion.

“We are nearly there, having addressed most of the issues. It’s just a matter of time before both countries reach a suitable agreement for the announcement,” Agarwal noted.