India at an Alarming stage: U.S tariffs impact start showing its criple face. India lossing manufacturing sector edge due to adverse impact of U.S trade tariffs. Albeit the impact has been reduced due to diversification to other countries export.
As we know Trump government had imposed significantly higher tariff on Indian goods which is 50% duties announced in August. Since then the trade deal has not taken any shape till now. Right of now – In a report India’s factory activity has slipped to a nine-month PMI low, the rupee faces renewed depreciation pressure, and critical labour-intensive industries are confronting their biggest disruption.
India at an Alarming stage: U.S. tariffs impacting manifacturing sector
India is facing pressure on both sides of its trade equation. On the export front, the U.S.- India’s biggest market-has been blocked by heavy tariffs which directly hurting sectors worth over $20-22 billion each year.
Because of higher duties, Indian products became most expensive in the American market, while competitors like Bangladesh, Vietnam, and Maxico continue to enjoy much lower tariff rates. As a result, many U.S. buyer swifting from India to other alternative country, especially in the sectors where margins were already thin. Exporters, particularly MSMEs, are beginning to experience payment delays, shrinking order volumes, and even contract were canceled.
Key problems:
- Competitors (Bangladesh, Vietnam, Mexico) enjoy far lower duty rates.
- Buyers in the U.S. are shifting supply contracts away from India.
- MSME exporters face payment delays, order cancellations, and shrinking margins.
Imports Becoming Costlier
India still depends heavily on imports such as:
- Crude oil
- Electronics
- Industrial machinery
- Metals
- Fertilizers
With a weaker rupee and global commodity volatility:
- Import bills are rising.
- Manufacturing input costs are climbing.
- Consumer inflation risks are re-emerging.
The result is a worsening current account balance, constraining India’s fiscal flexibility.
India at an Alarming stage: Rupee weaking
In recent decade Indian rupee has been facing the most toughest time. The recent slide of Indian currency has become on the biggest talking points in the economy. The International Monetary Fund (IMF) has added weight to the discussion of downgrading of the currency, signalling that the rupee is under stress than before.
For months, India has been battling a widening trade deficit. Exports have been falling, especially because U.S. tariffs have made Indian goods more expensive in their biggest overseas market. At the same time, imports remain high, particularly essentials like crude oil, electronics, metals, and industrial machinery. This imbalance pulls the rupee downward. Global tensions have also pushed foreign investors to reduce their exposure to emerging markets, leading to outflows that weaken the currency further. (India at an alarming stage)
Key drivers behind the rupee weakness
- Widening trade deficit as exports fall sharply while imports—especially energy—remain elevated.
- Foreign capital outflows triggered by geopolitical tensions and a stronger U.S. dollar.
- Export slowdown as U.S. tariffs make Indian products significantly costlier.
A weaker rupee typically supports exports, but that benefit is neutralized when foreign markets impose tariffs. Instead, businesses face: (India at an alarming stage)
- Higher imported input costs, especially chemicals, metals, electronics components.
- Lower profit margins for export-oriented MSMEs.
- Higher inflationary pressure domestically.
India’s economic growth is still comparatively strong, but the currency downgrade signals that investors are increasingly cautious about external vulnerabilities. (India at an alarming stage)
India at an alarming stage: PMI falling to a nine-month low
India’s manufacturing PMI slipping to a nine-month low reflects a deeper structural cooling rather than a routine monthly fluctuation. The index’s decline points to a broad-based deceleration across new orders, export demand, and business sentiment, suggesting the sector is entering a period of external vulnerability. The most significant drag came from weakening export orders — contracting at the fastest pace in over a year — as U.S. tariff measures sharply reduced the price competitiveness of Indian goods in one of their most important markets.
This downturn is already influencing production behaviour. Firms are reducing raw-material purchases, slowing inventory accumulation and adopting a more cautious hiring strategy to protect profitability. Although domestic demand is holding up, the sharp fall in forward-looking indicators implies that manufacturers expect sustained pressure in the coming months.
Key pressure points highlighted by the PMI data:
- Export orders weakened sharply, hitting their lowest level in over a year.
- Hiring growth slowed, signalling caution among factory owners about future demand.
- Purchasing activity softened, showing firms are managing costs and inventory more tightly.
- Business confidence dipped, reaching some of the weakest levels in the past several quarters.
- Input-cost inflation eased, but this offered limited benefit due to softening global demand.
Input prices have risen more slowly, which could have supported margins, but the inability to translate subdued cost pressures into stronger output growth shows a more fundamental issue: India’s export-led manufacturing cycle is losing momentum at a time when global trade conditions are tightening. If these trends continue, the sector risks becoming a drag on industrial output, employment generation, and overall GDP performance. The PMI data therefore acts as a timely warning that India will need both domestic policy support and improved global trade access to stabilise its manufacturing growth path.
