- | 11:40 am
March PMI slipped to its weakest level since June 2022 as oil, freight and supply pressures from the Middle East conflict hit manufacturers
India’s manufacturing sector lost momentum in March, with the HSBC India Manufacturing Purchasing Managers’ Index (PMI) falling to 53.9 from 56.9 in February, its weakest reading since June 2022, as the war in the Middle East pushed up oil and freight costs, disrupted supply chains and weighed on demand.
A reading above 50 still signals expansion, but the slowdown was broad enough to suggest that India’s factory rebound is running into a harsher external environment even as domestic activity remains resilient.
Output and new orders both rose at their slowest pace in close to four years, pointing to softer underlying demand. At the same time, export orders climbed to a six-month high, employment growth hit a seven-month high, and business confidence rose to its strongest level since May 2024. That combination suggests Indian manufacturers are still hiring and planning for growth, but are doing so while absorbing a fresh geopolitical cost shock rather than riding a clean demand upswing.
The immediate pressure point is energy. Manufacturers faced their steepest cost pressures since August 2022, with prices for aluminum, chemicals, fuel and steel all rising sharply.
HSBC Chief India Economist Pranjul Bhandari said disruptions linked to the conflict in the Middle East were “reverberating through the global economy and weighing on Indian manufacturers.”
Even then, firms raised selling prices at the slowest pace in two years, a sign that pricing power is not strong enough to fully pass through the new cost burden.
S&P Global’s latest global manufacturing commentary said March growth slowed as global trade flows neared stagnation, while input costs surged and supply chains became more stretched.
Reuters reported similar patterns across Europe and Asia, with supply delays and higher energy costs lifting some headline PMI readings even as the underlying picture became less convincing.
The closure of the Strait of Hormuz after the US-Israeli attack on Iran had already driven up energy and freight costs and disrupted gas supplies to parts of India’s manufacturing sector, shipping and air travel.
In response, Director General of Foreign Trade Lav Agarwal said New Delhi was examining cuts to import duties on critical raw materials and other essential goods, and could regulate exports if needed to protect domestic supplies.
India will also allow factories in Special Economic Zones to sell more goods domestically at lower customs duties for a year starting 1 April, a move announced in the February budget but made more urgent by higher US tariffs and the Middle East war, Reuters reported this week.
The policy covers sectors including chemicals, engineering goods, machinery, textiles, pharmaceuticals and electronics.
The World Trade Organization (WTO) said in its March outlook that more than 60 tariff actions had been recorded since the start of 2025, affecting about 11% of world trade when applied to 2024 trade flows.
The WTO also said the global merchandise trade forecast for 2026 remained above its previous forecast, but warned that trade policy uncertainty had increased and that services trade growth would slow further under a scenario incorporating the Middle East conflict.