New Delhi, March 24: India’s manufacturing and services sectors experienced a decline in output growth this March. The increase in energy prices, driven by rising tensions in the Middle East, is the primary cause. This information was revealed in the HSBC Flash India PMI data released on Tuesday.
The PMI Composite Output Index, which reflects the health of the manufacturing and services sectors, stood at 56.5 in March. A PMI above 50 indicates growth, while a figure below this threshold signals a contraction in economic activity.
Pranjul Bhandari, HSBC’s Chief Economist for India, stated, “Domestic demand has softened, leading to a decline in new orders, which grew at the slowest pace in over three years. However, new export orders saw a record increase. Cost pressures are mounting, but companies are absorbing some of this increase by reducing margins.”
Firms indicated that the ongoing conflict in the Middle East, unstable market conditions, and inflationary pressures have slowed growth. Input costs and selling prices recorded their fastest increases in 45 and seven months, respectively.
According to data compiled by S&P Global, there was also a slowdown in the growth of new orders for both manufacturing and services companies. Overall sales experienced the slowest growth since November 2022.
In March, the total volume of outstanding business increased for the fourth consecutive month. Manufacturing data indicated a rise in purchasing levels and inventory at the end of the previous quarter. However, the growth rates in both cases slowed compared to February.
The PMI data noted, “Companies absorbed a significant portion of their increased cost burden, as evidenced by the rise in selling prices, which were considerably lower than input costs.”
HSBC reported that Indian private sector companies remain optimistic about increasing production levels over the next 12 months. Improvements in efficiency, marketing campaigns, and inquiries from new customers were cited as reasons for their positive outlook.
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