India's March Private Business Activity Slows to Lowest Since October 2022, Missing Forecasts

India's private sector business activity slowed in March 2025 to its lowest level since October 2022, with the composite PMI dropping to 56.5, missing forecasts amid rising inflationary pressures and geopolitical tensions in the Middle East.

PMI Data Shows Growth Deceleration

• The HSBC flash India Composite Purchasing Managers' Index (PMI) declined to 56.5 in March from 58.9 in February, falling short of the Reuters poll median of 59.0.
• A PMI reading above 50.0 indicates expansion; the March figure reflects growth but at a decelerated pace compared to previous months.

Manufacturing and Services Sectors Underperform

• Manufacturing PMI: Slowed to 53.8 in March from 56.9 in February, below the poll expectation of 56.8.
• Services PMI: Decreased to 57.2, underperforming the analyst forecast of 58.3.
• Domestic demand for goods and services weakened, even as international orders rose to their highest level recently.

Geopolitical and Inflationary Drivers

• Companies cited the Middle East conflict, unstable market conditions, and inflationary pressures as key factors dampening growth.
• Input costs increased at the fastest rate in 45 months, and selling charges rose at the fastest pace in seven months.
• Higher energy prices and disruptions to trade routes from the conflict have exacerbated economic challenges for India.

Government Warnings and Currency Pressure

• Prime Minister Narendra Modi stated in parliament that "the situation in West Asia is concerning" and warned that "difficult global conditions caused by this war are likely to persist for a long time."
• He urged Indians to remain prepared and united, referencing the COVID-19 pandemic response.
• India's current account deficit is expected to widen due to energy costs, contributing to the rupee's depreciation to record lows.

Recent Trends and Reversal of Momentum

• Business sentiment had improved earlier in 2025 following trade deals with the U.S. and the European Union.
• In February, private companies saw a rapid rise in total new orders and international sales, leading to increased hiring and output.
• The March slowdown marks a significant reversal from this positive trend, highlighting vulnerability to external shocks.