India’s business activity weathers another month of Trump tariffs as other nations struggle

India's business activity keeps humming despite challenges

India’s business activity zoomed in May, unscathed by Trump tariffs and conflict with Pakistan, even as other developed nations struggled with contraction for yet another month, showed preliminary Purchasing Managers’ Index data released on May 22.

The HSBC Flash India Composite PMI Output Index rose to a 13-month high of 61.2 compared with 59.7 in the previous month, riding on a 14-month rise in services and 11-month rise in manufacturing PMI.

“India’s flash PMI indicate another month of strong economic performance. Growth in production and new orders among manufacturing firms remains robust, despite a marginal cooling from the rates of increase observed in April,” said Pranjul Bhandari, chief India economist, HSBC.

In contrast, data released by various agencies and compiled by S&P Global put developed nations across Asia and Europe in a much tougher fix, as the world continues to struggle with high tariffs.

Japan’s composite output index slipped into contraction with index value of 49.8 compared with 51.2 in the previous month. Australia’s business activity declined to a three-month low of 50.6 compared with 51 in the previous month, whereas Eurozone’s business activity declined to a six-month low of 49.5.

The PMI value of 50 separates contraction from expansion, with a below 50 value signalling a contraction in output.

The United Kingdom was the only country to have experienced an uptick in business activity, still the PMI remained in contraction territory, at 49.4 in May. The UK is the only country till now to have inked a deal with the US after the announcement of reciprocal tariffs by Donald Trump on April 2.

Trump reversed his stance on April 9, imposing a 10 percent flat rate on all countries barring China, which too was later dropped after both Washington and Beijing entered into negotiations. Average US tariffs stand at the highest rate in nearly a decade.

Optimism Suffers

Another stark contrast between the countries was the outlook for year ahead. While optimism remained high in India, businesses across developed world had a bleak outlook.

“Furthermore, although
brighter news on tariffs and trade appears to have helped restore some confidence among businesses, sentiment about prospects in the year ahead is still subdued,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence commenting on UK’s flash release.

Eurozone witnessed a further dip in optimism to its lowest level since October 2023, while Japan’s optimism was second lowest since initial wave of Covid pandemic.