India's manufacturing sector grew at its slowest pace in nearly four years in March, weighed down by rising cost pressures, intense competition, heightened uncertainty and the ongoing conflict in West Asia, a private survey released on Thursday showed.
The HSBC India Manufacturing Purchasing Managers' Index (PMI) declined to 53.9 in March from 56.9 in February, marking its lowest reading since June 2022. A PMI reading above 50 indicates expansion, while a reading below 50 signals contraction.
The seasonally adjusted index, which tracks overall business conditions based on new orders, output, employment, supplier delivery times and inventories, pointed to the weakest improvement in operating conditions in close to four years. The headline number also slipped below its long-run average of 54.2, according to the survey.
The two largest sub-components—new orders and output—expanded at their slowest pace since mid-2022. Survey respondents cited challenging market conditions, elevated input costs and the war in West Asia as key factors restraining growth.
Cost pressures intensified sharply during the month, reaching their steepest level since August 2022. However, manufacturers largely absorbed the higher input costs, resulting in only a modest rise in selling prices—the weakest increase in two years. Input prices rose across a wide range of commodities, including aluminium, chemicals and fuels.
Despite slowing domestic momentum, firms continued to purchase additional materials for production and inventory-building. While the pace of inventory accumulation eased to a three-month low, it remained historically strong, with companies pointing to sales growth and efforts to ensure smooth operations and uninterrupted supply chains.
External demand provided some support, with export orders registering the strongest growth since last September. Indian manufacturers reported increased demand from markets such as Australia, Brazil, Canada, mainland China, Europe, Japan, the Middle East, Turkey and Vietnam.
Employment rose at the fastest pace in seven months, and business confidence about output over the next year improved.
Commenting on the data, Pranjul Bhandari, chief India economist at HSBC, said the easing of the manufacturing PMI to 53.9 reflected the impact of disruptions linked to the conflict in the Middle East, which are reverberating through the global economy. She added that softer demand, rising uncertainty and sharply higher input costs are weighing on manufacturers, though firms are currently absorbing much of the cost increase, keeping output prices relatively contained.
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