India’s manufacturing rises to 17-year high in August

India’s manufacturing activity in August rose to a 17-year high, according to the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI).

On the back of increased production efficiency and health demand conditions, the PMI rose to 59.3 in August from 59.1 in the previous month.

The PMI of above 50 suggests expansion and below 50 suggests contraction.

One of the factors that could have been behind the growth in manufacturing could be US President Donald Trump’s 50 per cent tariffs on India, according to Pranjul Bhandari, Chief India Economist at HSBC.

As Firstpost has previously reported, Indian businesses ramped up production and exports to ship as much goods as possible to the United States before the commencement date of Trump’s tariffs. This could have understandably be behind the surge in manufacturing.

“India’s manufacturing PMI hit another new high in August, driven by a rapid expansion in production. The increase of US tariffs on Indian goods to 50 per cent 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 Bhandari, according to PTI.

Tariffs to eat into manufacturing, GDP growth

Last week, India reported a 7.8 per cent GDP growth for the April-June quarter — well above the expected 6.5 per cent projected by the Reserve Bank of India (RBI). It was the fasted growth in last five quarters. But Trump’s tariffs are set to eat into the growth and moderate the numbers in next quarters.

In the wake of lower year-on-year momentum of government capital expenditure and the looming hit to exports from American tariff and penalties, growth would be dampened in the coming quarters, notwithstanding the relief offered by GST rationalisation, according to Aditi Nayar, the Chief Economist and Head of Research & Outreach at ICRA.

“Amidst continuing uncertainty, we maintain our baseline GDP growth forecast at 6 per cent for FY2026,” said Nayar, as per PTI.

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Last month, the RBI had projected that the real GDP would grow at 6.5 per cent this year, with 6.5 per cent in the first quarter, 6.7 per cent in the second quarter, 6.6 per cent in the third quarter, and 6.3 per cent in fourth quarter.

However, analysts have said that Trump’s tariffs, which will affect as much as 60 per cent of Indian exports to the United States, could drag down GDP growth to up 5.5 per cent. Even after the relief that would come from consumption surge with GST rate cuts, the growth could still be dragged down to 6 per cent, according to estimates.