India’s manufacturing sector continued its strong run in August despite higher US tariffs, with the Purchasing Managers’ Index (PMI) touching a near 18 year high of 59.3 compared with the 16-month peak of 59.1 recorded in July.
"India’s manufacturing PMI hit another new high in August, driven by a rapid expansion in production. The increase of US tariff on Indian goods to 50% might have contributed to the slight easing in new export orders growth, as American buyers refrain from placing orders in the midst of tariff uncertainty," said Pranjul Bhandari, chief India Economist at HSBC.
August marks the third consecutive month that the PMI has remained above the 58-level, underscoring the sector’s resilience against external headwinds.
New orders touched a 57-month high during August, as production levels rose at the fastest pace since the pandemic.
"Overall orders growth, on the other hand, held up much better, suggesting that domestic orders remained robust, helping to cushion against tariff-related drag on the economy. Manufacturers’ continued optimism for future output is a positive sign," Bhandari added.
Survey participants noted demand buoyancy and advertising success as reasons for strong growth. Sentiment among manufacturers also increased in August after it had declined to a near three-year low in July. Companies retained their pricing power as well with selling prices rising at a faster pace, even as input cost inflation was below its long-run average.
"The marked rate of inflation seen in August was the highest for three months," the release stated. There was worry on the employment front, however, as job creation declined to its lowest level since November 2024.
The prime minister on August 15 announced a new scheme to help create 35 million jobs over the next two years. The scheme will compensate both employers and employees for giving jobs to the youth.
The PMI performance mirrors the first-quarter GDP numbers, when manufacturing output rose 7.7 percent in Q1FY26, compared with 7.6 percent in the same period last year.
Economists note that strong domestic demand and robust export orders have sustained momentum even as geopolitical uncertainties and tariffs weigh on global trade.
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