India’s private sector economy ended FY25 on strong footing, sustaining robust expansions in new business intake and output, according to preliminary HSBC flash PMI data. The HSBC Flash India Composite Output Index – a seasonally adjusted index that measures the month-on-month change in the combined output of India’s manufacturing and service sectors – dropped marginally from February’s final reading of 58.8 to 58.6 in March. The latest figure was above its long-run average of 54.7 and indicated a sharp rate of expansion. The slowdown reflected a softer increase in services activity, as factory production rose at the quickest pace since July 2024.
Pranjul Bhandari, Chief India Economist at HSBC, said, “India’s manufacturing sector expanded at a faster pace in March, according to the flash PMI. The output index rose to its highest level since July 2024. Yet the margin squeeze on manufacturers intensified as input price inflation ticked up while factory gate prices rose at the weakest rate in a year. The moderation in new export orders growth was also noteworthy amid tariff announcements.”
Manufacturing vs services activity
The HSBC Flash India Manufacturing PMI increased from 56.3 in February to 57.6 in March. This signalled a notable improvement in operating conditions that was broadly aligned with the average for the FY25. Three of its five main sub-components — output, new orders and stocks of purchases — rose since last month.
When explaining the increase in output, private sector companies mostly remarked on positive demand trends. Indeed, new orders rose further, thereby stretching the current sequence of expansion to over three-and-a-half years. Goods producers indicated a quicker increase than in February, and one that was above the growth rate recorded for service providers. Among the latter, the pace of expansion was the second-slowest since November 2023 as firms noted an intensification of competitive pressures.
In terms of order book volumes, Indian private sector companies said that it continued to be supported by international sales. Per the HSBC report, new export order growth eased to a three-month low, but remained marked and above the average since the series started in September 2014. Manufacturing companies registered a faster upturn in new business from abroad than their services counterparts.
In line with the trend in nearly three-and-a-half years, outstanding business volumes across India’s private sector increased during March. The rate of accumulation slowed from February, however, and was mild overall. There were softer increases in both the manufacturing and service categories, the HSBC report stated.
Nevertheless, the HSBC release stated that efforts to stay on top of workloads and fulfil rising demand needs prompted private sector companies to hire extra staff in March. “Despite slowing to a six-month low, the aggregate pace of job creation was solid by historical standards. For the first time in seven months, manufacturers signalled a faster increase in headcounts than service providers,” it stated.
Private sector businesses in India reported a further increase in their operating expenses, amid greater outlays on copper, electronics, food (especially fruits and vegetables), leather, medical equipment, rubber and vehicle spare parts. HSBC said that the cost pressures were stronger in the service economy, despite a slowdown here and an acceleration at goods producers. The aggregate rate of inflation nevertheless remained below its long-run average, it added.
Although some firms sought to share additional cost burdens with their clients by lifting selling charges, the report maintained, competitive conditions limited the extent to which these were passed on. “Prices charged for Indian goods and services rose at the weakest rate since February 2022, with similar increases noted across the two monitored categories,” it said.