India private sector growth hits three-year low as war-driven costs dent demand
Benglauru— India’s private sector expanded at its slowest pace in more than three years in March as rising costs linked to the Middle East conflict weakened domestic demand, even as export orders surged to a record high, a business survey showed on Tuesday.
The HSBC flash India Composite Purchasing Managers’ Index, compiled by S&P Global, fell to 56.5 from February’s 58.9, missing expectations in a Reuters poll and marking the sharpest slowdown in 18 months. While readings above 50 indicate expansion, the drop signalled a loss of momentum at the end of the fiscal year.
Manufacturing slowdown deepensThe manufacturing sector bore the brunt of the slowdown, with its PMI declining to a 4-1/2-year low of 53.8 from 56.9. Factory output growth weakened to its softest pace since August 2021, reflecting heightened uncertainty and subdued consumer demand.
The services sector, which makes up the bulk of India’s economy, also eased, with its PMI slipping to 57.2 from 58.1.Cost pressures intensifyInput costs rose at their fastest pace since June 2022, driven by higher prices for oil, energy, food, metals and chemicals.
Firms responded by increasing selling prices at the quickest rate in seven months, though some absorbed costs by compressing margins.India’s heavy reliance on imported energy has amplified the impact.
As the world’s third-largest oil importer, it sources about 90% of its crude and nearly half of its natural gas from overseas, making it vulnerable to price shocks linked to disruptions in the Strait of Hormuz. Oil prices have risen more than 40% since the conflict began.
External demand offers supportDespite weakening domestic demand, international orders rose to their highest level since the sub-index was introduced in 2014, with businesses reporting increased demand from Asia, Europe, the Americas and the Middle East.
Business confidence improved to its strongest level since September 2023, supporting the fastest pace of job creation since August, even as inflation risks mount and growth prospects face renewed pressure.
