India’s manufacturing sector expanded at its weakest pace in nearly four years in March 2026, as rising cost pressures, intense competition, heightened uncertainty and the war in West Asia weighed on new orders and output, a private survey showed on Thursday.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI) fell to 53.9 in March from 56.9 in February — its lowest level since June 2022.
The PMI ranges between 0 and 100, with a reading above 50 indicating expansion from the previous month and below 50 signalling contraction.
The survey is based on responses from around 400 manufacturers. Responses are collected in the second half of each month and capture changes compared to the previous month.
“…the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) – a gauge of overall conditions derived from measures of new orders, output, employment, supplier delivery times and stocks of purchases – indicated the weakest improvement in overall business conditions in close to four years. Also, the headline figure slipped below its long-run average of 54.2,” the survey said.
The two largest sub-components — new orders and output — rose at their slowest pace since mid-2022. Anecdotal evidence suggested growth was curbed by challenging market conditions, cost pressures and the war in West Asia, the survey added.
Cost pressures rise
The survey noted an intensification of cost pressures — the steepest since August 2022 — but firms largely absorbed the higher input costs. This was reflected in only a modest uptick in selling prices, the weakest increase in two years.
“Indian manufacturers continued to purchase additional materials for use in production processes and to add to inventories. The overall rate of growth slowed to a three-month low, but was historically strong. When explaining the latest upturn, panellists remarked on sales growth as well as their efforts to ensure smooth operations and uninterrupted supply,” the survey said.
Input costs rose sharply across a broad range of items, including aluminium, chemicals and fuels.
External demand holds
Despite softer domestic momentum, external demand provided some relief.
Indian manufacturers recorded the strongest expansion in export orders since last September, with gains reported from clients in Australia, Brazil, Canada, mainland China, Europe, Japan, the Middle East, Turkey and Vietnam.
Firms also raised employment to the greatest extent in seven months and turned more optimistic about output in the year ahead.
“India’s manufacturing PMI eased to 53.9 in March from 56.9 in February, marking its lowest level since June 2022. Disruptions linked to the conflict in the Middle East are reverberating through the global economy and weighing on Indian manufacturers. 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.
Backlogs ease
In a positive development, outstanding business volumes declined for the first time in nearly 18 months. The survey attributed this to additional hiring and a softer rise in new orders, which helped clear backlogs.
The survey’s projection is broadly in line with the government’s estimate of 7.6% real GDP growth for the current financial year, which requires 7.3% growth in the March quarter.
According to the new GDP series released in late February, with 2022-23 as the base year, manufacturing has been a key driver of growth over the past three financial years. The sector expanded 12.7% in FY24 and 9.3% in FY25, and is projected to grow 11.5% in the current financial year, as per official data.