Nomura notes weakness as industrial growth hits 14-month low amid solid GDP; Trump tariffs hinder GST relief

Nomura's analysis emphasizing the 14-low momentum in India's industrial production adds a degree of worry notwithstanding the robust GDP data and GST relief. The relief anticipated from the recent tax cuts is being overshadowed by the mounting pressure from Trump's tariffs. According to Nomura, India's most recent industrial production data reveals a widespread underperformance and growing resistance to Trump tariffs, raising concerns for markets that had up to now found solace in the country's impressive headline GDP figures. October’s industrial production growth came in at a meager 0.4 percent year-on-year -- significantly below expectations, and the worst print in 14 months. The statistic mirrored the standstill in the country’s core sector, where growth also slid to a 14-month low of 0 percent, pulled down by energy-intensive businesses.

The stress is broad-based. While power generation decreased by 6.9% due to lower demand brought on by cooler temperatures and prolonged rainfall, coal output dramatically decreased by 8.5%, reversing the August increase. Manufacturing growth slowed to 1.8 percent and mining fell 1.8 percent within the IIP basket, suggesting that the slowdown is not limited to a single industrial chain node. Leather, textiles, food items, drinks, rubber and plastics, and fabricated metals are among the labor-intensive and tariff-exposed industries that continue to be hardest hit by the severe 50% Trump tariffs, according to Nomura, with a progressive decline visible in the majority of categories. The brokerage stated that there has been "little respite" even in the first month of widespread GST reduction and that domestic policy assistance is being overtaken by trade frictions on a global scale. The underlying picture inside manufacturing is unequal. Only 9 of 23 industry groups recorded growth in October. Basic metals (+6.6%), coke and refined petroleum products (+6.2%), and automobiles (+5.8%) were pockets of resilience.

 Nonetheless, weakness endures over the wider range of intake. Consumer durables declined 0.5 percent, reversing last month’s double-digit rise, while consumer non-durables decreased 4.4 percent, pointing to dampened demand. Primary goods also fell, while growth cooled in investment-linked categories: infrastructure/construction goods slipped to 7.1 percent from 10.5 percent, and capital goods slowed to 2.4 percent from 4.7 percent. The main source of concern for markets is still the discrepancy between headline macro statistics and industrial reality. Nomura reaffirmed that the Q3 GDP increase, which was unexpected at 8.2 percent, is due to a low and possibly negative deflator, which could keep reported real GDP high even as high-frequency indicators weaken. The brokerage anticipates a mixed sectoral profile for Q4: investment and export-related sectors, especially those sensitive to tariffs, are likely to remain under pressure, while consumption may have a brief boost from GST reductions and holiday spending.

Nomura’s overall message for investors is one of guarded caution -- the core industrial engine is losing traction, and the sectors most vital to employment and exports are structurally pinched.