Nomura flags weakness as industrial growth hits 14-month low despite strong GDP; Trump tariffs blunt GST relief

India’s latest industrial production readings show a broad-based underperformance and increasing struggle against Trump tariffs, said Nomura, adding a layer of caution for markets that have so far taken comfort from buoyant headline GDP numbers.

October’s industrial production growth came in at a mere 0.4 percent year-on-year -- well below expectations, and the weakest print in 14 months. The figure mirrors the stagnation in the country’s core sector, where growth also slipped to a 14-month low of 0 percent, dragged down by energy-intensive industries.

The stress is broad-based. Coal output contracted sharply by 8.5 percent, reversing the surge seen in August, while electricity generation fell 6.9 percent, affected by cooler temperatures and extended rainfall that lowered demand. Within the IIP basket, mining declined 1.8 percent and manufacturing growth cooled to 1.8 percent, indicating that the slowdown is not confined to a single node of the industrial chain.

Trump tariffs overshadow GST cuts relief

Nomura said that labour-intensive and tariff-exposed sectors -- leather, textiles, food products, beverages, rubber & plastics, and fabricated metals -- continue to bear the brunt of the steep 50 percent Trump tariffs, with sequential deterioration evident across most categories. Even the first month of broad-based GST cuts has delivered “little respite”, said the brokerage, adding that domestic policy support is being overwhelmed by global trade frictions.

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The underlying picture within manufacturing is uneven. Only 9 of 23 industry groups posted growth in October. Pockets of resilience came from basic metals (+6.6 percent); coke and refined petroleum products (+6.2 percent); and motor vehicles (+5.8 percent).

However, weakness persists across the broader consumption spectrum. Consumer durables slipped 0.5 percent, reversing last month’s double-digit expansion, while consumer non-durables fell 4.4 percent, pointing to muted demand. Primary goods also contracted, and growth cooled in investment-linked categories: infrastructure/construction goods eased to 7.1 percent from 10.5 percent, and capital goods slowed to 2.4 percent from 4.7 percent.

GDP growth vs underlying data

For markets, the divergence between industrial reality and headline macro data remains the key tension. Q3 GDP growth surprised at 8.2 percent, but Nomura reiterated that this outperformance reflects a low -- and potentially negative -- deflator, which risks keeping reported real GDP elevated even as high-frequency indicators soften. The brokerage expects Q4 to deliver a mixed sectoral profile: consumption may see a temporary lift from GST reductions and festive spending, but investment and export-linked sectors are likely to stay under pressure, particularly those exposed to tariffs.

Nomura’s overall message for investors is one of measured caution -- the underlying industrial engine is losing traction, and the sectors most important to employment and exports appear structurally squeezed.

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