India Flash PMI slips to 56.5 in March, weakest expansion since 2022

India's private sector growth slows to its weakest pace since late 2022 as soft domestic demand and rising costs weigh, even as export orders hit a record high

India’s private sector growth slowed to its weakest pace in nearly three-and-a-half years in March, as softer domestic demand and rising cost pressures weighed on economic activity.

 

The HSBC Flash India Composite PMI Output Index fell to 56.5 in March from 58.9 in February, marking the slowest expansion since October 2022, according to data released by S&P Global.

 

Pranjul Bhandari, chief India economist at HSBC, said, "Output growth eased across both manufacturing and services as the energy shock unfolds. Softer domestic demand weighed on new orders, which rose at the slowest pace in more than three years, despite a record surge in new export orders. Cost pressures intensified, but companies are absorbing part of the increase by squeezing margins."

 

 

Manufacturing hit harder than services 

 

The slowdown was more pronounced in the manufacturing sector, where output growth eased sharply amid global uncertainties and inflationary pressures. Factory output expanded at its slowest pace since August 2021.

 

The manufacturing PMI dropped to 53.8 in March from 56.9 in February, a four-and-a-half-year low, while the manufacturing output index fell to 55.1.

 

Services activity also moderated, with the business activity index easing to 57.2 from 58.1, marking the weakest growth since January 2025.

 

Geopolitical tensions weigh on demand 

 

Companies attributed the slowdown to weaker domestic demand, market instability and inflationary pressures, alongside the impact of the ongoing West Asia conflict.

 

Firms reported that geopolitical tensions, including joint strikes by the US and Israel and Iran’s counterattacks, disrupted international travel and affected business activity.

 

New orders growth slows despite export surge 

 

New business growth weakened across both manufacturing and services, with total new orders rising at the slowest pace since November 2022.

 

However, export demand remained strong, with international orders rising at the fastest pace on record, driven by demand from Asia, Europe, the US and West Asia.

 

Cost pressures hit near four-year high 

 

Inflationary pressures intensified during the month, with input costs rising at the fastest pace in nearly four years due to higher prices of energy, metals, chemicals and food items.

 

Although firms passed on some of the increased costs to customers, selling price inflation rose at a slower pace, indicating pressure on profit margins.

 

Hiring and outlook remain stable 

 

Despite the slowdown, companies continued to hire, with employment rising at the fastest pace since August last year, supported by business optimism and future order pipelines.

 

Firms remained optimistic about output growth over the next 12 months, citing efficiency improvements, marketing efforts and new client enquiries as key drivers of confidence.