New Delhi: India’s private sector output grew in March at its weakest pace since October 2022, reflecting a softer upturn in domestic demand for goods and services despite surging export orders, S&P Global said on Tuesday. S&P cited its composite output index based on survey responses from 400 manufacturers and 400 service providers.

The HSBC flash India PMI composite output index, a seasonally adjusted index that measures month-on-month change in the combined output of India's manufacturing and service sectors, fell from a final reading of 58.9 in February to 56.5 in March, highlighting the weakest pace of growth in close to three-and-a-half years, S&P Global said in a statement.

The sobering trend at the end of the financial year comes in the wake of the war between Israel and US, and Iran, which has dealt a heavy blow to global energy trade, leading to a spike in oil and gas prices.

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Companies indicated that the West Asia war, unstable market conditions and inflationary pressures all dampened growth, while input costs rose at their fastest pace in 45 months and selling charges at their fastest rate in seven months, S&P Global stated.

The largest slowdown was seen at goods producers, who reported that the war in West Asia weighed on production growth by exacerbating market instability, driving inflationary pressures higher and restricting demand through heightened future uncertainty among clients and end consumers. March's increase in factory output was the softest since August 2021, the statement said.

Service providers also indicated a weaker upturn in business activity—one that was the least marked since January 2025. Anecdotal evidence particularly pointed to disruptions to international travel and the negative impact of the joint strikes by the US and Israel and Iran's counterattacks, the statement said.

"Output growth eased across both manufacturing and services as the energy shock unfolds. Softer domestic demand weighed on new orders, which rose at the slowest pace in more than three years, despite a record surge in new export orders. Cost pressures intensified, but companies are absorbing part of the increase by squeezing margins,” S&P global said in the statement quoting Pranjul Bhandari, Chief India Economist at HSBC.

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State-run SBI’s research team said in an analysis on Tuesday that the severity of the West Asia crisis is unfolding at a higher pace.

The crisis doesn’t pose any immediate food production shock but represents high probability input-cost and food-inflation shock over the next one or two crop cycles, with risk concentrated in fertilizers, diesel and logistics, said the SBI research team. The upcoming Kharif season may see a rise in input prices, if disruption persists, it said.

SBI Research said 18 sectors including fertilizers, FMCG, textiles, leather, crude oil and natural gas as well as chemicals and petrochemicals are impacted due to the West Asia crisis, some through input cost escalation and others due to primary feedstock disruption, shipping disruption and LNG shortages.

If the war continues for another month, rupee might cross ₹96 a dollar and if the war stops in another 7-10 days, the domestic currency is likely to be largely trading in the range of ₹91.5-94.5 against the dollar, SBI Research said.

India’s chief economic advisor in the finance ministry V. Anantha Nageswaran had said last month that the country’s real gross domestic product is expected grow 7.3% or more in the March quarter, which is necessary to achieve 7.6% growth in the current fiscal year ending March, as per the second advance estimates released last month. For FY27, Nageswaran then raised the growth forecast to 7-7.4% from the earlier projection of 6.8-7.2% in the Economic Survey presented in January, taking into account the subsequent trade deal announcement with the US.

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