India’s private sector growth slows in March, manufacturing stays strong: HSBC flash PMI survey

New Delhi: India’s private sector showed signs of softening in March, with overall business activity expanding at a slower pace than in February, according to an HSBC flash survey. While services lost momentum, manufacturing remained a bright spot, sustaining strong growth despite mounting pricing pressures.

The HSBC Flash India Composite Output Index, which tracks manufacturing and services activity, dipped to 58.6 in March from 58.8 in February. A reading above 50 signals growth, while a value below that threshold implies contraction. The index has held above this level for more than three years.

Services lost steam, with the HSBC Flash India Services PMI Business Activity Index slipping to 57.7 from 59.

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Manufacturing, however, remained resilient, with the HSBC Flash India Manufacturing PMI rising to 57.6 from 56.3 and the Manufacturing PMI Output Index climbing to 60.6—its highest level since July 2024.

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Pricing pressures presented a mixed picture. Input costs surged at a faster pace, squeezing margins, even as output price inflation fell to its lowest level in over three years, highlighting a divergence between cost and pricing trends.

"India’s manufacturing sector expanded at a faster pace in March…The output index rose to its highest level since July 2024," said Pranjul Bhandari, chief India economist at HSBC.

Yet, manufacturers faced intensified margin pressures as input costs rose, while factory gate prices increased at their weakest rate in a year, Bhandari noted, adding that the slowdown in new export orders was also notable amid tariff announcements."

New orders continued their upward streak in March, extending a growth trend that has lasted over three-and-a-half years. The rate of expansion remained strong but eased slightly from February.

"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," the survey noted.

International sales continued to support order books, though new export orders grew at their slowest pace in three months. Manufacturers led the way in overseas business, recording a sharper rise than service firms.

Despite strong business confidence, sentiment slipped to a seven-month low in March. "Both manufacturers and service providers were slightly less upbeat towards output prospects than in February," the survey added.

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India’s goal of reaching a $10 trillion economy within the next decade is being driven by manufacturing growth, with a focus on semiconductors, electronics, electric vehicles, renewable energy, and defense. To support this vision, the government has ramped up capital expenditure, particularly in infrastructure, job creation, and industrial expansion.