Climate change, GST’s reverse effect, and global competition pulled down India’s manufacturing in November 2025. According to HSBC’s Purchasing Managers’ Index (PMI) for the sector fell to the lowest level in the past nine months. One of the major reasons was the extended monsoon season, which was quite unseasonal. In several parts of the country, heavy rains continued till October, and in places that are not impacted by the retreating monsoon. This led to logistics issues, and problems with goods reaching their destinations, or leaving the factories. The situation has only improved in the past few weeks, which may aid manufacturers in December.
According to Pranjul Bhandari, chief India economist, HSBC, who was quoted by a new agency, “Overall new orders came in soft, indicating that the GST-led boost may have peaked.” GST 2.0 was announced with fanfare by the prime minister on August 15, and kicked in during Navratri in late September. This boosted demand in September-October due to the rate cuts. Sales of several goods boomed, as everyone celebrated the bonanza. However, November was the real test, and experts felt that if the demand continued, it would prove that the GST effect was sustainable. This may not be true, if the December PMI shows similar trends.
While most experts, and policy-makers were concerned about the impact of the US tariffs on Indian exports, they failed to realise the other implications. As more nations, contrary to India, inked bilateral trade deals with America, which allowed the former’s products to enter the American markets at lower rates, India suffered. The global market became more competitive, as goods from the other nations became cheaper compared to those from India. This created an environment of competitive global pricing. Indian manufacturers found themselves squeezed between the higher American tariffs, and lower prices from other nations.
This is evident in the export orders, and figures. The HSBC survey indicates that the new deals for cross-border shipments across manufacturing, and services are “rising at the slowest pace since March 2025, which reflects this dual tariff-pricing effect. Merchandise exports in October 2025 contracted by more than 12 per cent, and the slowdown was evident across sectors, except electronic goods (rise of over 19 per cent) that are exempted from the US tariffs. Economists felt that this was due to the base effect. Trade deficit, however, soared to an all-time high due to higher imports, which were due to the tripling in gold imports “aided by festive demand, and possibly speculative/investment demand.”
On an overall basis, the composite PMI slipped below 60 in November 2025, which was lower than in October 2025, as also below an agency’s poll estimate. It was the third straight monthly decline, which hints that the “momentum in Asia’s third-largest economy is moderating.” Fortunately, since the index remains over 50, which marks the distinction between economic expansion and contraction, there is not much reason to worry, as things can change. Remember that the recent RBI data indicated that GDP growth may slow down a bit over the next two quarters in this fiscal year. Hence, the central banks, and policy-makers need to be careful, and wary.
What saved the day was the rise in the PMI for the services sector, which inched up a bit. However, between June and September this year, the monthly PMI remained over 60, and then dipped below this mark in October. The November figure was even lower. This implies that everything is not well with the sector. America’s decision to hike the fees for H-1B visas, and restrict entry, apart from other measures that will impact the spouses of the visa holders, is possibly biting the operations of the Indian IT industry. Finding new markets, or making deeper inroads into the existing non-US markets will take time. A re-rating of IT stocks has already happened.
One needs to wonder how the data is getting more confused, and diverging from some of the realities. For example, November should have been a boom time for both manufacturing, and services. Inflation is at a low, with food inflation in the negative. Input cost hikes are the weakest in the past five years. The central bank cut interest rates in the past, and is waiting for the lag effect. GST 2.0 was aimed to boost demand. Despite a string of positives, the dip in manufacturing PMI seems surprising, despite the reasons cited above. A churn is happening within the economy.
Most experts, and think tanks are still optimistic about the future. They expect the growth rates to be stable, and consistent, and the fastest among the major economies. A recent report by Deloitte states, “Looking ahead, this is likely to be one of the strongest quarters of the year. While higher US tariffs could weigh on exports and manufacturing in subsequent quarters, domestic demand should continue to drive growth, supported by easing inflation, GST rationalisation, and continued policy support.” It adds that private consumption rose seven per cent, investments remained healthy, and gross value-added grew 7.8 per cent, with agriculture rebounding.
If one focuses on manufacturing, and more so on MSMEs, rather than large firms, a 2024 survey identified three challenges. One, access to credit is the sector’s Achilles’ heel. The credit gap may be Rs 30 lakh crore, or a quarter of the demand. Two, intense competition is evident in less capital-intensive sectors. Smaller firms struggle against the larger players, especially after demonetisation, and the pandemic. Three, tech adoption is uneven among the MSMEs. While 90 per cent of them accept digital payments, less than 20 per cent access digital lending platforms. The use of automation, and advanced digital tools for operations remains limited. MSMEs’ future is crucial to India’s, as is the case with other nations.
Ironic as it may seem, India’s immediate future hinges on global events, despite the robust domestic demand, and ongoing reforms. On the optimistic side, a trade with the US to complement the ones with the UK, and European Union will ease external uncertainties. But a slowdown in America, delays in recovery across the West, and delays in India-US trade pact may disrupt the growth trajectory. Hence, whatever the experts and policy-makers may say about self-reliance, and India’s ability to sustain external shocks, the latter may prove decisive. The stock markets are gearing up for the former scenario. Recently, a study claimed that the Sensex will be at 1,07,000 by December 2026, or a rise of more than 20,000 points.
