India's Economic Activity Bucks Trump Tariff Fears, Flash PMIs Show

India’s economy buzzed with activity in August, led by a strong services sector, even though US President Donald Trump imposed a 50% tariff on Indian goods, a flash survey by HSBC Holdings Plc showed.

The manufacturing purchasing managers’ index rose to 59.8 in August from 59.1 in July, while the services purchasing managers’ index climbed to 65.6 from 60.5 last month. That helped the composite index jump to 65.2 compared to 61.1 in July.

During August, India’s private sector economy posted its sharpest expansion since survey data were first collected in December 2005, HSBC said in a statement on Thursday. “The rapid upturn in business activity was driven by a surge in sales volumes, with total new order intakes rising at one of the quickest rates on record,” the statement said.

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 jump in services index, the current level being its all-time high, was led by a “sharp pick up in new business orders, both export and domestic,” said Pranjul Bhandari, chief India economist at HSBC, in the statement. Domestic orders rose for manufacturing firms, but new export orders remained unchanged. Margins improved as output prices rose faster than input costs, she said.

The survey comes against the backdrop of Trump’s plans to impose higher duties on the South Asian nation as soon as next week, citing its Russia ties. The move would give India the highest tariff rate in Asia, threatening a manufacturing sector that Prime Minister Narendra Modi has spent a decade trying to build to compete with the likes of China.