Private sector activity hits eight-month high amid tariff pause

India's private sector witnessed significant growth in April, with the Composite Purchasing Managers Index (PMI) climbing to 60, an eight-month high, from 59.5 in March. This marks a robust start to the fiscal year, as reflected in the HSBC Flash India Composite PMI, which remained above the 59-mark for the second consecutive month.

The marked improvement is attributed to a substantial increase in new export orders, likely fuelled by a 90-day pause in tariff implementation by the US. According to Pranjul Bhandari, chief India economist at HSBC, "New export orders accelerated sharply, likely buoyed by the 90-day pause in the implementation of tariffs. As a result, output and employment grew, for both, manufacturers and service providers."

This temporary suspension by the Trump administration in imposing reciprocal tariffs against US trading partners has provided a favourable environment for India's export sector, leading to increased output and employment opportunities.

The global economic landscape, however, remains fraught with uncertainty, primarily due to rising trade tensions. The International Monetary Fund (IMF) has revised its global economic growth estimates, lowering them by nearly a percentage point from 2024. This includes a reduction of a percentage point for the US and a 1.3 percentage point decrease for China. Despite these global challenges, India's economy seems relatively insulated, supported by robust domestic demand. The IMF has adjusted India's FY26 growth forecast to 6.2% from an earlier estimate of 6.5% and predicts a 6.3% growth rate for FY27.

India's economic progress contrasts with the more subdued outlook for major economies such as the US and China, which face more significant downward revisions due to trade-related uncertainties. The Composite PMI's continued strength above 59 indicates a positive trajectory for India's manufacturing and services sectors. "She was referring to the Trump administration's decision to pause the so-called reciprocal tariffs against US’ trading partners for 90 days," highlights the temporary relief this pause has provided amidst global economic strains. With domestic demand remaining robust, India is better positioned to navigate the current global economic climate.