Export orders slow, GST cut impact wanes as sentiment dips to 3.5-year low
PMI slips sharply to 56.6 in November
India’s manufacturing sector lost momentum in November, with the HSBC Purchasing Managers’ Index (PMI) — compiled by S&P Global — dropping to 56.6 from 59.2 in October. This marks the lowest reading in nine months, driven by a decline in export orders and waning support from earlier GST rate cuts.
While a PMI reading above 50 still denotes expansion, the slowdown points to growing macroeconomic pressures, especially from external trade barriers.
US tariffs weigh on new export orders
New export orders fell to a 13-month low, as US tariffs dampened demand for Indian goods. According to Pranjul Bhandari, Chief India Economist at HSBC, the tariff headwinds are offsetting the domestic policy support from GST cuts, leading to a visible slowdown in manufacturing expansion.
“Business confidence fell sharply in November, reflecting concerns over tariffs and challenging global market conditions,” she said.
Growth slows despite competitive pricing
The survey noted that while order books continued to grow, manufacturers cited delays in project execution, rivalry among firms, and demand-side pressures as reasons for slower expansion. Many attributed sales performance to competitive pricing and increased client interest, though the overall growth rate moderated significantly.
Job creation and purchases taper
Employment trends mirrored the slowdown in orders:
- Job creation expanded at the slowest pace in 21 months
- Purchasing activity was scaled back as sales growth softened
- New order growth recorded its weakest upturn since February
Despite consistent expansion, manufacturers are becoming more cautious in hiring and inventory planning.
Input cost inflation and selling prices ease
Input cost inflation and output charges rose at the slowest rate in 9 and 8 months, respectively. This easing of inflation is a silver lining amid the broader slowdown, potentially giving firms more room to manage margins without passing high costs to consumers.
Export momentum dips across regions
While international sales remained positive overall, growth was mild:
- Export volumes rose to clients in Africa, Asia, Europe, and the Middle East
- However, the pace of growth was the weakest in over a year
Firms are now closely watching global demand signals, particularly from advanced economies, where tightening fiscal and trade policies are starting to pinch.
Confidence hits 3.5-year low
Although businesses remained broadly optimistic about future output, positive sentiment fell to its lowest level in nearly three and a half years. Key concerns include:
- Tougher global competition
- Tariff uncertainty
- Reduced margin buffers
- Slowing new orders pipeline
This dip in confidence suggests more conservative planning ahead, especially around capex, hiring, and inventory.
Manufacturing momentum fades after strong Q2
The latest PMI results follow a strong second quarter, where manufacturing GVA grew 9.1%, the fastest in six quarters, according to National Statistics Office (NSO) data. But the November cooldown signals a potential deceleration in the third quarter if export constraints and investment hesitancy persist.
