Business sentiment for the coming year slipped to its lowest in about three-and-a-half years amid rising competition and tariffs headwinds.

Policy context highlights reshoring trends under tariff regimes, rising AI and high-tech manufacturing investments, and government shutdown effects as factors shaping the current conditions.

Tariffs, including 50% duties on India, weighed on exports, though diversification to other markets and ongoing trade framework talks offered some mitigation.

Tariffs and trade uncertainty were repeatedly cited as drivers of offshore shifts, staffing cuts, and longer-term sourcing cautions across manufacturers.

Industry commentary stressed tariff impacts, supplier delays, and U.S. policy uncertainty as pressures on competitiveness and the potential reallocation of business to international suppliers.

Export-import frictions and supply-chain volatility linked to tariff policy were identified as key influences on the sector’s outlook.

Analysts note data from S&P Global and commentary from HSBC’s Pranjul Bhandari to ground the view of the current PMI trends.

Prices rose, with the Prices Index at 58.5% driven by steel, aluminum costs, and tariffs, underscoring persistent input-cost pressures across large industries.

GST cuts offer some support but are unlikely to fully offset tariff headwinds to demand.

Publication details: the report was updated and published on December 1, 2025, at 11:29 AM IST.

India’s manufacturing activity expanded in November, but at a slower pace as weaker domestic demand, softer exports, and fewer new hires cooled momentum.

An easing in input-cost inflation provided a rare bright spot, with the Prices Index cooling to a nine‑month low and output charges rising only modestly, potentially supporting hopes for RBI rate cuts.