HSBC Flash India PMI: Private Sector Closes FY25 Strong As Manufacturing Sales Growth Quickens

India's private sector economy ended FY25 on strong footing, with the manufacturing sector posting a quicker increase in sales and output.

The HSBC Flash India Composite Output Index was stable at 58.6 in March from February's final reading of 58.8. The latest figure was above its long-run average of 54.7 and continued to indicate a sharp rate of expansion. The slight slowdown reflected a softer increase in services activity, as factory production rose at the quickest pace since July 2024.

The HSBC Flash India Manufacturing PMI increased from 56.3 in February to 57.6 in March, signalling a notable improvement in operating conditions that was broadly aligned with the average for FY25. Three of its five main sub-components — output, new orders and stocks of purchases — rose since last month.

When explaining the increase in output, private sector companies mostly remarked on positive demand trends. Indeed, new orders rose further, thereby stretching the current sequence of expansion to over three-and-a-half years. The rate of growth was sharp, despite being a tick below that seen in the previous month.

Goods producers indicated a quicker increase than in February, and one that was above the growth rate recorded for service providers. Among the latter, the pace of expansion was the second-slowest since November 2023 as firms noted an intensification of competitive pressures.

Order book volumes at Indian private sector companies continued to be supported by international sales. New export order growth eased to a three-month low, but remained marked and above the average since the series started in September 2014. Manufacturing companies registered a faster upturn in new business from abroad than their services counterparts.

Outstanding business volumes across India's private sector increased during March. The rate of accumulation slowed from February, however, and was mild overall. There were softer increases in both the manufacturing and service categories. Nevertheless, efforts to stay on top of workloads and fulfil rising demand needs prompted private sector companies to hire extra staff in March. For the first time in seven months, manufacturers signalled a faster increase in headcounts than service providers.

Private sector businesses in India reported a further increase in their operating expenses, amid greater outlays on copper, electronics, food, leather, medical equipment, rubber and vehicle spare parts. Cost pressures were stronger in the service economy, despite a slowdown here and an acceleration at goods producers.

The aggregate rate of inflation, nevertheless, remained below its long-run average. Although some firms sought to share additional cost burdens with their clients by lifting selling charges, competitive conditions limited the extent to which these were passed on. Prices charged for Indian goods and services rose at the weakest rate since February 2022, with similar increases noted across the two monitored categories.

Business confidence remained strongly positive, but the overall level of sentiment slipped to a seven-month low in March. Fierce competition featured as the main worry among survey participants in the qualitative part of the survey. Both manufacturers and service providers were slightly less upbeat towards output prospects than in February.