Indian factories and manufacturing sector achieved its fastest growth in 16 months in July 2025, propelled by a sharp rise in new orders and robust demand. The HSBC India Manufacturing Purchasing Managers’ Index (PMI) increased to 59.1 from 58.4 in June, reflecting strong activity as it remained well above the 50 mark that denotes expansion. This growth was driven by a near five-year high in new orders, supported by effective marketing strategies and favorable market conditions, resulting in a 15-month peak in factory production.
Issue in Manufacturing Sector
Despite this strength, concerns are growing. Business optimism has fallen to its lowest level since July 2022, with manufacturers citing rising competition and escalating input costs as major issues. Inflation pressures are intensifying, with raw material costs climbing at a faster pace, leading firms to raise selling prices for the tenth consecutive month. Sentiment on X echoes this duality, noting the PMI’s rise to 59.1 as a positive indicator but highlighting worries over increasing costs and a slowdown in hiring, which dropped to an eight-month low.
Indian Factories Growth Despite US Tariffs
New U.S. tariffs, set to impose a 25% duty on Indian goods starting August 2025, may further challenge export growth, which had already softened from June’s 17-year high. The Reserve Bank of India is expected to hold its policy rate at 5.50% in its next meeting, though persistent inflation could shape future decisions. While the manufacturing sector shows resilience, the combination of weaker job creation and potential trade barriers suggests a cautious outlook for the coming months.
Published in SouthAsianDesk, August. 2nd, 2025
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