India's manufacturing sector experienced its slowest growth in almost four years in March, as the ongoing conflict in the Middle East created uncertainty, disrupted supply chains, and negatively impacted demand. Additionally, rising oil prices increased input costs, according to a private survey.

The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, dropped to 53.9 in March from 56.9 in February, closely aligning with a preliminary estimate of 53.8.

New orders, an important indicator of demand, and output grew at their weakest rate in nearly four years.

"Disruptions linked to the conflict in the Middle East are reverberating through the global economy and weighing on Indian manufacturers," stated Pranjul Bhandari, chief India economist at HSBC.

On a positive note, export orders reached a six-month high in March.

Manufacturers faced the highest cost pressures since August 2022, with significant increases in prices for aluminium, chemicals, fuel, and steel.

In spite of the rise in input costs, companies raised their selling prices at the slowest rate in two years.

Employment growth remained strong in March, hitting a seven-month high as firms hired more staff to manage backlogs and support expansion efforts.

Manufacturers maintained an optimistic outlook for the year ahead, with sentiment reaching its highest level since May 2024, driven by expectations of agricultural strength and capacity expansion.