India’s business growth dipped in March due to weaker services demand, PMI shows

BENGALURU: Growth in India’s overall business activity softened in March as robust manufacturing expansion failed to offset a slowdown in the services sector, a private survey showed on Monday.

HSBC’s flash India Composite Purchasing Managers’ Index, compiled by S&P Global, slipped to 58.6 in March from February’s final reading of 58.8, lower than a Reuters poll’s median prediction of 59.0.

The 50-mark divides growth from contraction.

The manufacturing PMI index increased to 57.6 from 56.3, remaining in the expansion territory for more than three-and-a-half years.

But the dominant-services sector’s PMI index fell to 57.7 from 59.0 in February, contributing to the fall in the overall index.

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

New orders - a key gauge for demand - and output, rose from last month, signaling better operating conditions for manufacturers. In contrast, new business in services eased as demand took a hit.

However, international demand for both manufacturing and services slowed, expanding at the slowest pace in three months.

“The moderation in new export orders growth was also noteworthy amid tariff announcements,” added Bhandari.

U.S. President Donald Trump has imposed fresh tariffs on goods from China, Canada and Mexico and his constant flip-flops on trade has made the business outlook uncertain. More tariffs on U.S. trading partners are looming on April 2.

Indian businesses were less upbeat about future activity as sentiment for the coming year fell to a seven-month low, which also slowed the pace of hiring.

Input costs increased at a faster pace in March as goods producers recorded an acceleration to a three-month high.

“The margin squeeze on manufacturers intensified as input price inflation ticked up while factory gate prices rose at the weakest rate in a year,” she said.

Businesses did not pass on higher input costs to clients and overall charge inflation rose at its weakest pace since February 2022.

India consumer inflation fell below the Reserve Bank of India’s (RBI) medium-term 4% target in February for the first time in six months, raising the chances of another rate cut next month.