New Delhi: India’s private sector output grew at the weakest pace since October 2022 in March, reflecting a milder pick-up in domestic demand for goods and services despite a rise in export orders, S&P Global said on Tuesday.
India’s HSBC flash composite PMI, a seasonally adjusted index that measures the month-on-month change in the combined output of India’s manufacturing and services sectors, fell from a final 58.9 in February to 56.5 in March, highlighting the weakest pace of growth in nearly three-and-a-half years, S&P Global said in a statement.
The sobering trend at the end of the financial year comes in the wake of the Israel-US-Iran war, which has dealt a heavy blow global energy trade, leading to a sharp rise in oil and gas prices.
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Companies said the war in West Asia, volatile market conditions and inflationary pressures all dampened growth, while input costs rose at the fastest pace in 45 months and sales charges at the fastest pace in seven months, S&P Global said.
Manufacturing growth hit a three-year low as the war in West Asia fueled market instability, inflation and consumer uncertainty. The March increase in factory output was the slowest since August 2021, the statement said.
Service providers also indicated a weaker uptick in business activity – one that was the least significant since January 2025. Anecdotal evidence pointed mainly to disruptions to international travel and the negative impact of joint US-Israeli strikes and Iranian counterattacks, the statement said.
West Asia ripple effect
“Output growth moderated in both manufacturing and services as the energy shock plays out. Softer domestic demand weighed on new orders, which grew at the slowest pace in more than three years, despite a record increase in new export orders. Cost pressures intensified, but companies are absorbing some of the increase by squeezing margins,” the head of S&PHS Global said in a statement from India, BHSeconari.BC.
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The SBI’s state research team said in an analysis on Tuesday that the severity of the crisis in West Asia is developing at a higher pace.
The SBI research team said the crisis will soon increase food inflation and input costs, namely fertilizers, diesel and logistics, even if immediate production remains stable. In the coming Kharif season, there may be an increase in input prices if the disruption persists, the company said.
SBI Research said 18 sectors, including fertilizers, FMCG, textiles, leather, oil and gas, as well as chemicals and petrochemicals, are being hit by the crisis in West Asia, some due to escalating input costs and others due to disruptions in primary raw materials, transportation disruptions and liquefied natural gas (LNG) shortages.
Currency, GDP outlook
If the war continues for another month, the rupee may cross ₹96 per dollar and if the war ends in another 7-10 days, the domestic currency is likely to trade mostly in the range of ₹91.5-94.5 against the dollar, SBI Research said.
Finance Ministry Chief Economic Adviser V. Anantha Nageswaran said last month that the country’s real gross domestic product (GDP) is expected to grow by 7.3% or more in the March quarter, which is necessary to achieve 7.6% growth in the current fiscal year ending in March, according to a second preliminary estimate released last month. For FY27, Nageswaran then raised the growth forecast to 7-7.4% from an earlier projection of 6.8-7.2% in an economic survey presented in January, taking into account the subsequent announcement of a trade deal with the US.
Key things
- Private sector growth in March hit the lowest level since late October 2022.
- The conflict in West Asia triggered an energy shock that drove up global fuel prices.
- Industrial production growth slowed significantly to the slowest pace since August 2021.
- Input costs rose to a 45-month high, forcing companies to squeeze profit margins.
- SBI Research warns that the rupee could fall beyond 96 to the dollar.
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