The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) hit a 14-month high of 58.4 in June, rising from a three-month low of 57.6 in May. A reading above 50 indicates expansion. The rebound in headline PMI was backed by strong export orders.
The rate of expansion in new export orders was the third highest since data collection started in March 2005, said the survey report. Firms noted strengthening demand from across the globe, with the US mentioned more frequently. Among sectors, consumer, intermediate and investment goods categories saw faster increases in international orders.
Front-loading of exports ahead of the 9 July deadline has buoyed headline PMI, helping Q2CY25 to end on a solid note. But this cheer could be short-lived as uncertainty on reciprocal tariffs still lurks.
Nomura’s leading index of Asia ex-Japan’s aggregate exports, or NELI, edged down to 91.6 in July from 92.7 in June. NELI comprises nine components and has a three-month lead time. NELI’s drop is driven by weak import demand from China and a moderation in manufacturing PMIs for China and broader emerging markets, said the Nomura Global Markets Research report.
A sharper decline in export growth is likely in the coming months, driven not only by payback from tariff-driven frontloading, but also softer foreign demand amid high business uncertainty, cautioned Nomura. Payback is a situation where a surge in exports due to an anticipated event is followed by a subsequent decrease in exports.
In this backdrop, confidence among Indian manufacturers is understandably muted. Business optimism measured by PMI’s Future Output Index slid to an eight-month low of 62.2 in June from 63.1 in May. Uncertainties surrounding competition, inflation and changes in consumer preferences weighed on sentiment.
Meanwhile, there is some respite on input cost inflation, and pricing power has improved. Input price inflation retreated to a four-month low, despite rising iron and steel costs. Average selling prices rose markedly in June, as companies passed on additional cost burdens (freight, labour, etc.) to customers. However, the outlook for goods exports is not upbeat, with the onus on domestic demand.
CareEdge Ratings India estimates merchandise exports to drop about 4% in FY26 after being flat in FY25. The combined share of the US and Europe in India’s overall exports has risen to around 50% in FY25 from 38% in FY15; slowing global economic growth, particularly in these regions, is likely to impact India’s manufacturing export performance in FY26, said the Care report dated 30 June.
