India's manufacturing growth slips to 9-month low: What's the reason?
What's the story
India's manufacturing sector witnessed a slowdown in November, with growth hitting a nine-month low. The decline is attributed to the impact of US tariffs on exports. The HSBC India Manufacturing Purchasing Managers's Index (PMI), compiled by S&P Global, fell from October's 59.2 to 56.6 last month, missing the preliminary estimate of 57.4.
Growth streak
PMI remains above expansion-contraction threshold
Despite the decline, the PMI stayed well above the 50-mark that separates expansion from contraction. This means that while growth has slowed down, it hasn't completely come to a halt. The index's current reading is part of the longest growth streak since S&P Global began tracking it in 2005, although it is lower than the previous month's reading.
Tariff effects
US tariffs impact India's manufacturing sector
Pranjul Bhandari, Chief India Economist at HSBC, said the November PMI confirms that US tariffs have slowed down manufacturing expansion. She also noted a sharp decline in business sentiment and expectations for future output. "The boost from cuts in goods and services tax may be fading and might be insufficient to offset the tariff headwind to demand," Bhandari added.
Market conditions
Factory production and new orders slow down
The slowdown in India's manufacturing sector is reflected in factory production and total new orders, which grew at their slowest pace since February. Survey participants cited the tough market conditions, delays in starting new projects, and also heightened competition as key reasons for the slowdown. Notably, growth in new export orders eased to its weakest level in over a year.
Employment and costs
Hiring trends and price pressures in manufacturing sector
Hiring trends in India's manufacturing sector also reflect caution, with job creation slipping to its weakest level in 21 months. The index tracking the expectations for future output dropped to its lowest reading since mid-2022 amid concerns over rising competitive pressures from global players. However, there was some relief on prices as input cost inflation slowed down to a nine-month low.