It may be more than a one-off spike. “It is
absolutely accurate that India has had the highest manufacturing PMI in Asia — and even among G20 economies — over the past few months, not just in the last quarter,” said Sujan Hajra, Chief Economist & Executive Director at Anand Rathi Group. “This outperformance signals genuine momentum, strongly backed by government-led reforms and policy initiatives.”
“Given that the drivers are domestic and structural, this trend could be sustainable despite global uncertainty,” he added.
Not exports, but domestic engines driving the surge
Countries like South Korea and Japan, with large export-heavy, tech-oriented manufacturing bases, tend to be more sensitive to global demand cycles — unlike India’s more diversified and consumption-driven sectors such as textiles, auto ancillaries, and pharmaceuticals.
“Headline PMIs are not always structurally comparable,” cautioned Arsh Mogre, Economist at PL Capital. India’s PMI is increasingly domestically driven, with exports contributing less than 12% of manufacturing GVA — versus 45% for Taiwan or Vietnam. So while India is numerically at the top, the underlying manufacturing models differ vastly,’ he added.
Mogre pointed out that the sub-indices confirm this was not an export-led upswing. In fact, export order growth slowed to a three-month low, further proving that India’s current manufacturing upcycle is largely inward-facing.
Supply-side factors continued to support the uptrend: commodity prices remained benign, with Brent crude averaging $74 per barrel and now falling further below $65 — its lowest level since August 1, 2022. Soft wholesale inflation, smoother freight flows, and shorter delivery times also contributed to easing input pressures.
“Structurally, this pattern resembles the 2014–15 and early 2018 cycles where internal demand — not exports — drove output,” the economist said.
“Unless it’s sustained by private capex and real income recovery, the current momentum may plateau.”
Tariffs test the foundation of India’s factory strength
However, it may be too soon to celebrate the momentum just yet. India’s manufacturing momentum has run into a significant test: the US has imposed a uniform 26% tariff on Indian exports, affecting nearly $75–78 billion, or about 18% of India’s total exports, according to Mogre.
The fallout is uneven across sectors. Labour-intensive and commoditised industries like textiles, gems and jewellery, and basic electronics are already seeing margin compression and order deferrals. Jewellery exports were down 23% YoY in February, and the new tariffs could exacerbate the stress, PL Capital Economist highlighted.
But other sectors remain better positioned. “Auto parts, pharma, and refined petroleum are more insulated due to either exemptions or tight supply-chain integration,” noted Mogre. Even smartphones, which now face tariffs, may retain an edge over competitors due to India’s relatively low comparative duties.
At a macro level, India remains buffered. Goods exports form about 20% of gross domestic product (GDP); the US contributes around 3.5%. The rest of the national income comes from services, consumption, and infrastructure-led capex. Moreover, after the latest tariff announcement by US President Donald Trump, India has an edge, particularly, in sectors like electronics and light manufacturing, for companies looking for destinations other than China.
India’s tariffs on US goods were already high, and the US move is being viewed as tactical rather than protectionist — possibly a bargaining chip ahead of a broader trade agreement later in the year. If India is able to reverse the tariff increase or secure a trade deal sooner than later, the sentiment may get a further boost. The sharp decline in oil prices last week may bring the much-needed cost relief.
“India’s fragmented manufacturing base — for example, the average textile factory size is just 300 workers versus 5,000 in Bangladesh — limits the ability to scale quickly,” Mogre said. “Regulatory friction, shallow backend value-add, and poor logistics remain bottlenecks.”
Sanjeev Krishan, Chairman of PwC, added: “It’s a call for Indian industry to become more efficient. Figure out logistics costs, think scale. Big can be beautiful, and better.”
“If we get infrastructure right, our 10–15% cost advantage becomes a margin game-changer,” Sameer Narang, Head of Economics Research at ICICI Bank, echoed the sentiment.
