India PMI data signals slower growth momentum as US tariffs linger

India’s private sector activity remained in expansion mode in December, but fresh survey data suggest momentum cooled toward the end of the year as external trade pressures persisted.

A flash survey by HSBC showed softer readings across manufacturing and services, even as demand conditions stayed broadly resilient.

The data arrives at a time when prolonged trade negotiations with the US have yet to deliver relief from steep tariffs imposed by President Donald Trump, particularly affecting labour-intensive sectors.

While domestic activity continued to grow, the moderation in headline indicators highlights how global trade uncertainty is beginning to shape business sentiment.

PMI readings ease in December

HSBC’s flash purchasing managers’ index data showed a decline across all major gauges in December compared with November.

The manufacturing PMI slipped to 55.7 from 56.6 a month earlier, pointing to slower but still solid expansion in factory activity.

Services sector growth also cooled, with the PMI falling to 59.1 from 59.8.

As a result, the composite index, which tracks overall private sector performance, dropped to 58.9 from 59.7 in November.

PMI readings are closely watched as early indicators of economic momentum. A figure above 50 signals expansion, while a reading below that level indicates contraction.

Despite the easing, all three indices remained comfortably above the 50 mark, suggesting growth continued across the economy.

What the PMI data measures

The PMI figures are based on preliminary surveys that assess business conditions such as output, new orders, employment, and input costs.

The December readings may be revised when the final PMI data is released next month.

These surveys are designed to capture business confidence and near-term trends rather than provide a full picture of economic performance.

HSBC noted that activity in India’s private sector continued to rise sharply toward the end of 2025, although the pace of growth slowed across both manufacturing and services.

This moderation reflects softer demand growth rather than a reversal in underlying expansion.

Trade pressures remain in focus

The easing in activity comes as trade talks between India and the US continue without a clear deadline for an agreement that could ease Washington’s 50% tariffs.

These tariffs have been a particular strain for labour-intensive industries, which are more exposed to shifts in external demand and price competitiveness.

Despite the ongoing uncertainty, some trade indicators have shown improvement. India’s trade deficit narrowed in November as exports recovered from a slump in October.

Shipments to the US also rose unexpectedly during the month, suggesting that certain exporters have managed to navigate the tariff environment more effectively than anticipated.

Export orders offer a mixed signal

Within the PMI data, new orders growth slowed overall in December, pointing to easing domestic demand momentum.

However, export-oriented businesses saw a different trend.

Growth in new export orders accelerated during the month and reached a three-month high, indicating firmer overseas demand despite the tariff backdrop.

This divergence suggests that while broader economic activity may be losing some speed, external demand pockets remain supportive, potentially cushioning the impact of prolonged trade negotiations on India’s private sector.