India’s Manufacturing PMI Dips to 58.1 in July 2025: Slight Slowdown Signals Resilience Amid Global Challenges
According to S&P Global’s most recent data, the manufacturing sector in India saw a slight slowdown in July 2025, with the HSBC India Manufacturing PMI falling to 58.1 from 58.3 in June. Even though the growth momentum has somewhat slowed, the PMI is still well above the 50 mark, indicating that factory activity is still expanding. This tenacity highlights the sector’s strength in the face of international trade tensions, such as the US imposing 25% tariffs on Indian goods starting August 1, 2025. Here is a thorough analysis of the PMI’s effects, contributing variables, and implications for India’s economic future.
S&P Global’s HSBC India Manufacturing PMI, which is based on surveys of about 400 manufacturers, gauges the state of the manufacturing sector by looking at new orders, output, employment, supplier delivery times, and inventories. Expansion is indicated by a reading above 50, and contraction is indicated by a reading below 50. The July PMI of 58.1 indicates strong activity, but the decline from 58.3 points to a minor slowdown in the rate of growth.
Key drivers of the slowdown include:
- • Softer New Order Growth: Due to global uncertainties, especially the US tariffs affecting industries like textiles and auto components, export orders eased while domestic demand remained strong, resulting in a slower growth rate for new orders.
- • Increasing Input Costs: Manufacturers reported increased prices for food, steel, and aluminum, among other raw materials, which exacerbated inflationary pressures. Businesses increased output prices by partially passing these costs on to customers.
- • Supply Chain Dynamics: As supplier delivery times shortened, allowing for the accumulation of input inventories, some businesses encountered difficulties due to increased freight costs, which were partially caused by disruptions in international trade.
The Manufacturing Output Index increased slightly from 61.4 to 61.8 despite the decline, indicating that demand-driven production growth was continuing. As a result of manufacturers hiring steadily to handle workloads, employment also increased sharply, indicating optimism about future production.
It should be noted that prior reports, including those published by Moneycontrol and The Tribune on July 25, 2025, referenced preliminary data gathered between July 9 and July 21 that showed a Flash PMI of 59.2 for July, a 17.5-year high. A correction in initial estimates is suggested by the final PMI of 58.1, which reflects a larger dataset. This disparity emphasizes how erratic early PMI readings can be and how crucial final numbers are for precise analysis. Later data indicating softer external orders and cost pressures dampened the optimism of the flash PMI, which was fueled by robust domestic and export demand.
The modest drop in the PMI coincides with major international issues, most notably the August 1, 2025, announcement of US tariffs that impose a 25% duty on Indian exports and penalties for Russian arms and oil purchases. These policies could impede manufacturing growth in export-heavy industries like pharmaceuticals and gems and jewelry, which account for $87 billion in annual exports. Market worries about trade disruptions are reflected in the Nifty 50 and Sensex, which dropped 0.86% and 0.97%, respectively, at opening on August 1.
Politically, the PMI’s tenacity supports the Modi administration’s claim of economic might through programs like Atmanirbhar Bharat and Made in India. PM Modi’s Rs 2,200 crore Varanasi initiatives and the government’s recent approval of Rs 11,169 crore railway projects indicate that infrastructure investment will continue to support manufacturing. The government’s tariff response has been criticized by the opposition, including Congressman Jairam Ramesh, who claims it reveals manufacturing vulnerabilities. Inflation control is given even more priority by the RBI’s decision to keep the repo rate at 6.5% on August 1, which may limit stimulus for manufacturers who are struggling with rising costs.
- • For Manufacturers: With 61% of surveyed firms reporting output growth, the PMI’s expansion, despite a slight dip, indicates opportunities in domestic markets. Cost control and market diversification techniques are necessary, though, due to growing input costs (such as the 8.9% increase in vegetable prices) and export difficulties. Companies can increase their competitiveness by utilizing programs such as PLI.
- • For Investors: Domestic demand is helping companies like Larsen & Toubro and Tata Steel, and manufacturing stocks, especially those in capital goods and consumer durables, are still appealing. Titan and other export-oriented businesses, however, might experience short-term pressure. On August 1, the Nifty Midcap 100 fell 1%, indicating caution for smaller businesses.
- • For consumers: Higher output costs may result in more expensive products, such as processed foods and electronics, which would have an effect on household spending plans. For factory workers, however, stable employment growth promotes income stability.
With users like @bsindia pointing out that the PMI is stronger than 58 and @economistindia pointing out the dangers of tariffs on exports, the public’s attitude toward X is cautiously optimistic. Confidence in economic stability is bolstered by the government’s debunking of financial emergency rumors linked to a fictitious $60 billion market loss.
Global trade volatility and inflationary pressures are challenges for the manufacturing sector. According to 78% of PMI respondents, input cost inflation could reduce margins if it isn’t fully passed on to customers. India’s export orders may be impacted by the US-China trade war, which increases demand uncertainty worldwide due to China’s 34% retaliatory tariffs on US goods. For 30% of manufacturers who depend on foreign inputs, the rupee’s depreciation to 83.75 vs. USD increases the cost of importing raw materials.
Looking ahead, the PMI’s reading above 50 indicates growth through Q3 of FY26, bolstered by infrastructure projects and demand during the holiday season. HSBC analyst Pranjul Bhandari predicts that, absent significant tariff increases, the August PMI will range between 58 and 59. As recommended by FIEO, the government’s efforts to diversify exports to the Middle East and ASEAN could counteract losses in the US market. If inflation falls below 4.5%, the RBI may consider lowering interest rates in October 2025, which would boost manufacturing.
India’s manufacturing sector is resiliently navigating global storms, as evidenced by its PMI of 58.1. It’s an exhortation to companies to diversify their markets and innovate. It draws attention to opportunities in domestically oriented businesses for investors. It serves as a reminder to policymakers to balance growth and inflation while addressing trade issues. Will manufacturing continue to be the foundation of India’s economy as it strives for a $10 trillion economy, or will pressure from around the world force more radical reforms? Although there are obstacles in the way, the future looks bright.
