India, Apr 24: India’s economic activity contracted in March as the war in West Asia weighed on manufacturing and infrastructure output, according to the Moneycontrol Eco Pulse Index, which slipped to 49 from 51.4 in the previous month.
A reading below 50 signals a contraction in momentum, suggesting that while parts of domestic demand remained resilient, geopolitical disruptions and softer industrial activity dragged overall growth lower during the month.
The Moneycontrol Eco Pulse tracks 38 high-frequency indicators across consumption, manufacturing, labour markets, trade and financial activity to provide an early monthly snapshot of India’s economic momentum ahead of official GDP releases.
What pulled the index lower?
The biggest drag came from manufacturing and infrastructure-linked sectors.
The HSBC India Manufacturing PMI fell to a 45-month low of 53.9 in March, from 56.9 in February, indicating slower factory activity amid war-related pressure on supply chains and input costs.
Core sector output witnessed its steepest contraction in 19 months, shrinking 0.4 percent after expanding 2.8 percent in February, reflecting weaker momentum in coal, electricity, refinery products and other infrastructure industries.
Electricity demand growth held at 1.7 percent, but was half of January’s 3.8 percent, signalling softer industrial and commercial consumption.
External demand also weakened. Merchandise exports fell 7.4 percent year-on-year in March after declining in February, while imports contracted 6.5 percent, highlighting softer trade flows and rising global uncertainty.
|
Date |
Feb-26 |
Mar-26 |
|
PMI Manufacturing |
56.9 |
53.9 |
|
ATF consumption |
3.9 |
0.7 |
|
Naukri Job Speak Index |
11.9 |
9.2 |
|
E-way bill generation |
18.8 |
12.9 |
|
Major Port Cargo Traffic |
5.1 |
1.1 |
|
Exports |
-0.8 |
-7.4 |
|
Core sector output |
2.8 |
-0.4 |
|
Wholesale inflation |
2.1 |
3.9 |
|
Four-wheeler sales |
27.2 |
22.9 |
|
Two-wheeler sales |
25.6 |
29.0 |
|
Electricity demand |
1.5 |
1.7 |
|
Non-food credit |
15.2 |
16.9 |
|
MGNREGA work demanded by persons |
-10.9 |
-21.8 |
Consumption offers some support
Despite the broader slowdown, domestic demand indicators remained supportive.
Four-wheeler sales rose 22.9 percent, while two-wheeler sales increased 29 percent, suggesting healthy retail demand. Three-wheeler registrations grew 27.3 percent, pointing to sustained mobility and last-mile transport activity.
Petrol consumption rose 7.6 percent, while diesel demand also increased, indicating logistics and transport activity remained steady despite external shocks. UPI transactions and digital spending trends were also firm during the month.
Labour market mixed
Urban unemployment edged up to 6.8 percent in March from 6.6 percent in February, while female labour force participation dipped to 20.1 percent from 20.4 percent.
The Naukri Job Index also moderated, easing to 9.2 percent from 11.9 percent, suggesting softer hiring sentiment.
Inflation risks and outlook
Wholesale inflation accelerated to 3.9 percent in March from 2.1 percent in February, likely reflecting rising commodity and fuel prices following the escalation in West Asia.
The March Eco Pulse reading highlights how quickly global shocks can transmit into India’s domestic economy through crude prices, freight costs and supply bottlenecks.
Moody’s Ratings on Tuesday lowered India’s growth forecast to 6 percent compared with 6.8 percent projected earlier, as it projected that the global oil shock arising out of the West Asia crisis will affect inflation, widen trade deficit and strain government finances.
Still, continued strength in consumer demand and payments activity may help limit the slowdown if external conditions stabilise. Multilateral agencies also expect trade normalisation with the US and new deals with the European Union and UK to support growth in FY27.
The World Bank raised India’s FY27 growth forecast to 6.6 percent from 6.3 percent projected earlier, while the IMF now expects the economy to grow 6.5 percent.
