Impact of 50% US tariffs start showing in India's economic activity
The loss of momentum in economic activity is an early sign of growth slowing in India, which is still pegged to deliver a GDP growth rate of 6.3-6.8% in FY26.
India's economic activity cooled in September after US President Donald Trump’s 50% tariffs took effect, according to a flash survey HSBC Holdings.
India's Manufacturing PMI slipped to 58.5 from 59.3 in August, while the Services PMI fell to 61.6 from 62.9 last month. That pulled the composite index down to 61.9 compared with 63.2 in August.
The loss of momentum in economic activity may indicate an early sign of growth slowing in Asia’s third largest economy, though the government is sticking to its 6.3%–6.8% GDP growth forecast for 2025-26.
On 27 August 2025, Trump doubled tariffs on India to 50%—one of the highest in the world—penalising the country for its trade barriers and purchases of Russian oil. To mitigate the impact, exporters had begun advancing shipments to the US in the earlier months.
The indexes reflect business confidence in the economy and are based on preliminary surveys. The data could get revised when final PMI figures are released next month. A reading above 50 indicates expansion in economic activity, while a print below that indicates contraction.
The 50% US tariffs “likely resulted in a slower rise in new export orders in August-September”, said Pranjul Bhandari, chief India economist at HSBC, said in a statement on Tuesday.
However, domestic orders climbed for a second straight month, as cuts in the goods and services tax buoyed sentiment and partly offset the drag from US levies, she said.
India’s government is working on measures to boost the domestic economy to ease the tariff pain. Prime Minister Narendra Modi overhauled the complex GST regime by cutting taxes on most items of everyday use, a move that is expected to spur consumption. Officials are also working on a broad support package for exporters hit by the US levies.
