India’s factories picked up the pace slightly in March. The country’s Index of Industrial Production (IIP) — a key measure of how much goods industries produce — grew by 3 per cent, just a touch higher than 2.7 per cent in February.
At first glance, this seems like a small, positive step. But scratch the surface, and there’s a more urgent story unfolding: manufacturers are rushing to push out exports before US President Donald Trump’s new tariffs take off.
The US, one of India’s significant trading partners, announced on April 2, 2025, new tariffs — 27 per cent on textiles, 26 per cent on electronics and jewellery, 25 per cent on steel, aluminium, auto parts, and chemicals.
However, following diplomatic talks, the tariffs were suspended for 90 days starting April 9. If no trade deal is reached, the new tariffs will kick in from July 9, 2025.
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And, when that happens, Indian companies will soon find it much more expensive to sell their products to American buyers, making them less competitive.
Knowing this, many companies — especially in sectors like textiles, machinery, petroleum products, and electronics — have been shipping goods faster than usual, trying to beat the deadline.
Dharmakirti Joshi, Chief Economist at ratings agency Crisil, told The Federal the recent rise in factory output is partly because of this frontloading. “Export-oriented sectors such as textiles, machinery and petroleum products saw growth improve, which could be due to frontloading of shipments ahead of reciprocal tariffs kicking in,” he said, referring to the March factory output numbers.
“The new-age exports segments — computers and electronic products — saw growth surge (21.5 per cent compared to 11.2 per cent earlier), again likely due to frontloading,” he added.
Analysts feel with growing uncertainty, slowing economic growth globally and the tariff — exports and investment demand are likely to be affected the most. The trend of businesses sending out as much as they can before it becomes too costly could only serve as a “short-term boost”, they add.
Over the next few months, once the tariffs kick in, production could slow down again — especially if global demand also weakens, said Joshi.
Rajani Sinha, Chief Economist at CareEdge Ratings, also pointed out that manufacturers seem to be stocking up on goods, anticipating tougher times ahead. “India’s industrial production growth improved to 3 per cent in March from a six-month low of 2.7 per cent in February. The overall improvement was supported by gains in electricity output and manufacturing activities, although a sharp slowdown in mining activity partially weighed on the headline number,” Sinha said.
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She also noted that while the production of consumer durable goods (things like refrigerators and cars) went up by 6.6 per cent, the production of everyday non-durable items (like soap and packaged food) dropped for the second month in a row.
This shows that domestic demand within India remains patchy. Rural areas seem to be bouncing back faster than cities, where people are still holding back on spending.
Still, Sinha remains hopeful. Falling inflation, a good farming season, lower interest rates, and recent tax cuts should encourage people to spend more in the coming months, she said.
However, there’s a catch. Private sector companies might be hesitant to invest in new factories or expand operations, because of all the uncertainty around global trade and geopolitics. “Looking ahead, it will be critical to monitor global trade and geopolitical risks, as they could pose risks to both private investment and consumption,” she warned.
The burst in production we’re seeing right now might not be real, sustainable growth, say analysts. It could just be a one-off spike — companies rushing to ship goods before the costs go up.
Export groups like the Federation of Indian Export Organisations (FIEO) are urging the Centre to step in, asking for faster trade agreements or relief measures. But so far, there’s little clarity on when help might arrive.
Despite all the worries about exports, there’s still some good news closer to home. According to Crisil’s Joshi, policy moves like income tax cuts and rate cuts by the Reserve Bank of India should give domestic demand a strong push this year.
Plus, crude oil prices — a major source of inflation — are expected to stay low, and the monsoon is forecasted to be normal again.
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Analysts say fiscal signs are healthy. Mahendra Patil, managing partner of MP Financial Advisory Services, pointed out that even though factory output (IIP) slowed compared to last year, overall economic activity remains resilient.
“The FY2025 IIP growth of 4 per cent, though lower than the 5.9 per cent recorded in FY2024, reflects a stable industrial performance amid broader economic normalization. March 2025 IIP remained steady at 3 per cent, supported by stable core sector activity. Strong growth in net direct taxes (13.57 per cent) and GST collections (9.44 per cent) underscores the resilience of the formal sector and services-driven momentum,” Patil said.
In other words, tax collections growing well is an indication businesses and services are still thriving.
