New Delhi: India’s manufacturing sector saw a modest slowdown in March, with the HSBC Flash India Manufacturing PMI easing to 53.9, reflecting global disruptions linked to the ongoing Middle East conflict and their impact on Indian manufacturers, according to the latest report released on Thursday.

The data, compiled by S&P Global, also highlighted rising cost pressures, with input prices climbing at the steepest pace since August 2022. Despite this, most companies absorbed the increased costs, registering only a modest rise in selling prices – the lowest in two years – helping to contain inflationary pressures in the manufacturing sector.

Job growth and inventory support manufacturing resilience

The report showed that manufacturers continued to expand employment, with job creation reaching its strongest pace in seven months. Efforts to build contingency stocks and secure uninterrupted supply chains also contributed to growth in input purchasing, supporting overall production stability.

“Output and new orders slowed noticeably, signalling softer demand and greater uncertainty. Meanwhile, input costs rose sharply across a broad range of items, including aluminium, chemicals and fuels. For now, firms appear to be absorbing much of the increase, keeping output prices relatively contained,” said Pranjul Bhandari, Chief India Economist at HSBC.

March saw input prices rise to their highest level in over three-and-a-half years, with costs for aluminium, chemicals, fuel, jute, leather, fabric, oil, rubber and steel notably increasing.

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Manufacturing output and external demand

Indian manufacturers maintained production growth, although at a three-month low. The report attributed the expansion to steady sales growth, proactive inventory management, and efforts to ensure smooth operations. Supplier delivery performance improved, indicating timely material availability, a key factor in sustaining manufacturing activity.

External sales also strengthened, registering the fastest expansion since September last year. Manufacturers reported increased demand from markets including Australia, Brazil, Canada, mainland China, Europe, Japan, the Middle East, Turkey, and Vietnam.

“The sector not only expanded employment to the greatest extent in seven months but also showed improved optimism for production over the coming year,” the report noted.

Outlook for India’s manufacturing sector

Despite global uncertainties, India’s manufacturing PMI data reflects resilience, supported by robust employment growth, strong external demand, and proactive inventory management. Analysts say continued monitoring of input cost pressures, geopolitical developments, and supply chain stability will be crucial for maintaining growth momentum.