In March, India’s private sector exhibited signs of a slowdown, as business activity expanded at a more tempered pace compared to February, based on findings from an HSBC flash survey. While the services sector faced a decline, manufacturing continued to shine, maintaining robust growth amid rising cost pressures.

Business Activity Shows Mixed Signals

The HSBC Flash India Composite Output Index, which monitors both manufacturing and services, fell to 58.6 in March from 58.8 in February. Notably, any figure above 50 indicates expansion, and this index has remained above that threshold for over three years.

• Services Sector Decline: The HSBC Flash India Services PMI Business Activity Index decreased to 57.7, down from 59.
• Manufacturing Resilience: In contrast, the HSBC Flash India Manufacturing PMI rose to 57.6 from 56.3, with the Manufacturing PMI Output Index reaching 60.6, the highest since July 2024.

Pricing Pressures and Market Dynamics

The pricing landscape presented a complex scenario. Input costs surged at a quicker rate, impacting profit margins, even as the inflation of output prices dropped to its lowest in over three years.

Pranjul Bhandari, HSBC’s chief economist for India, stated, “The manufacturing sector experienced faster growth in March, with the output index hitting its peak since July 2024.” However, he pointed out that rising input costs exerted pressure on margins, while factory gate prices increased at the weakest rate in a year. Additionally, the slowdown in new export orders was a significant concern, especially in light of recent tariff announcements.

• New Orders Growth: New orders continued on an upward trajectory in March, marking over three and a half years of growth. The expansion rate remained strong but showed a slight decrease compared to February.
• Goods vs. Services: Goods producers reported a quicker increase than service providers, with the latter experiencing their second-slowest expansion since November 2023, attributed to heightened competitive pressures.

Export Orders and Business Sentiment

While international sales bolstered order books, new export orders grew at their slowest rate in three months. Manufacturers outperformed service firms in this area. Despite generally strong business confidence, sentiment dipped to a seven-month low in March, indicating that both manufacturers and service providers were slightly less optimistic about future output compared to February.

Future Outlook for India’s Economy

As India aims for a monumental $10 trillion economy by 2030, the focus remains on accelerating manufacturing, particularly in sectors such as semiconductors, electronics, electric vehicles, renewable energy, and defense. To support this ambitious vision, the government has increased capital spending, emphasizing infrastructure, job creation, and industrial growth.

With these developments, the business landscape in India presents a blend of resilience and challenges, highlighting the importance of adapting to evolving market conditions.