India’s relatively strong industrial performance in November 2025, especially driven by the manufacturing sector as it was, was more likely a flash in the pan than the start of a consistent trend. The Index of Industrial Production (IIP) grew 6.7% in November, the fastest growth rate in 25 months. Within this, the manufacturing sector grew 8%, which also was the fastest in 25 months. On the face of it, this would look remarkable and heartening, especially since October 2025 had seen growth slow to a 14-month low. However, this surge in growth was more likely due to seasonal and one-off factors. According to economists, the strongest push for growth came from sellers re-stocking their supplies following the festive season. The second factor is that the government timed the Goods and Services Tax (GST) rate reductions to coincide with the festive season. This temporary bump in demand would have further eroded stock levels, which then need to be replenished. In fact, the consumer durables and non-durables sectors saw growth in November rebounding to 10.3% and 7.3%, a 12-month and 25-month high, respectively. The third factor that seems to have worked in November is the bounce back of the mining sector following two months of contractions due to an unseasonably long monsoon. The mining sector saw growth come in at a reasonably strong 5.4% in November 2025. All of these are legitimate reasons for growth to pick up, but are not sustainable ones. The electricity and mining sectors will be bound by the vagaries of the weather. Overall consumer demand has been sluggish and industry players are talking of the GST-related boost already ebbing. And the festive season will not come back around until October-November 2026.

In fact, the IIP grew just 3.3% in the longer April-November period, the lowest for these eight months in any of the post-COVID-19 pandemic years. The consumer non-durables sector contracted 1% during this period, showing that the boost in November is not indicative. That the strong growth in November is more an anomaly than a sign of things to come should not come as a surprise. The Reserve Bank of India, earlier this month, predicted that growth in Q3 would slow to 7% from an average of 8% in the first two quarters. The fourth quarter is predicted to slow even further, to 6.5%. All of the previous headwinds still exist. The 50% tariffs by the U.S. are still in place, private investment remains sluggish, foreign capital is pulling out of the country, the weakening rupee is making imports more expensive for an import-dependent economy, real wages are not growing fast enough, and consumer demand remains tepid. Ironically, November’s positive industrial data bring into focus the headwinds the economy is really facing.

India’s remarkable merchandise trade performance in November should come as some relief for the government, but should not be the basis for any complacency. India’s merchandise exports, hit by the stiff headwind of 50% tariffs by the United States, the biggest export destination, unexpectedly grew 19.4% to $38.1 billion in November 2025. This is the highest it has been in any November in the last 10 years. Also, India’s exports to the U.S. grew 22.6% to $6.98 billion in November 2025 as compared to November 2024. This was also 10.7% higher than in October 2024. This is all certainly welcome news, but it hides an element of deeper distress that will make itself apparent in the months ahead. While exports to the U.S. recovered in November, exporters say that this is because they are absorbing the hit of the higher tariffs, hoping that they will be short-lived. The other option, of losing customers and trying to win them back later after moderation of tariffs, is seen to be harder, at least for now. However, it might soon be the only option. Indian exporters to the U.S., a large chunk of which are micro, small, and medium enterprises in labour-intensive sectors, cannot continue absorbing the tariff impact for too long. The depreciating rupee is helping offset some of the impact, but India’s tariff differential with competing countries is too big to overcome. It also takes some time for supply chains to reroute. Reports are already coming in that exporters are seeing a significant drop in orders for January.

The trade deficit also shrank because India’s merchandise imports fell 1.9% to $62.7 billion in November 2025. Reducing imports is a tricky topic for India. While it is preferable to reduce import dependence in the medium term, India’s domestic capabilities are not yet robust enough to shoulder the load. Falling merchandise imports, therefore, suggest slackening demand. Coming so soon after the Goods and Services Tax rate reductions, this should be monitored carefully by the government. The broad outlines of the government’s Export Promotion Mission show that the government is thinking about how to alleviate the financial stress being faced by exporters. However, the detailed schemes have not been notified yet. These must be expedited. The government could also perhaps adapt some of its more successful COVID-era relief measures as well. For example, a credit guarantee scheme for exporters will do them more good than the planned moratorium on loan repayments will. Of course, these troubles will go away once the tariffs issue is resolved, which the government is saying will happen “very soon”. But the decision on this lies with the mercurial U.S. President Donald Trump. As such, the most prudent way forward is to hope for the best but continue preparing for the worst.