March PMI: West Asia conflict drags India's manufacturing growth to near 4-year low

Growth in India’s manufacturing sector slowed to its weakest pace in nearly four years in March as rising costs, global uncertainty and disruptions linked to the ongoing West Asia conflict weighed on demand, a monthly survey said on Thursday.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI) fell to 53.9 in March from 56.9 in February.

The latest reading was also below the long-run average of 54.2 and marked the softest improvement in overall business conditions since June 2022.

According to the survey compiled by S&P Global, growth in new orders and output eased to the slowest pace since mid-2022 amid challenging market conditions, heightened uncertainty and the impact of geopolitical tensions.

“Disruptions linked to the conflict in the Middle East are reverberating through the global economy and weighing on Indian manufacturers. Output and new orders slowed noticeably, signalling softer demand and greater uncertainty,” HSBC Chief India Economist Pranjul Bhandari said.

At the same time, input cost inflation surged to a 43-month high, driven by higher prices of aluminium, chemicals, fuel, rubber and steel, among others.

However, manufacturers were reluctant to fully pass on rising costs to customers, resulting in only a modest increase in output prices amid efforts to retain clients and remain competitive.

Employment also rose at the quickest pace in seven months as firms hired additional staff to support production and clear backlogs. Outstanding business volumes declined for the first time in nearly 18 months, aided by increased staffing and slower order growth.

“Finally, Indian manufacturers signalled a decline in outstanding business volumes for the first time in close to a year-and-a-half.” the survey noted. “Underlying data indicated that additional recruitment and a softer increase in new orders facilitated backlog clearances.”