Moneycontrol Eco Pulse Slips to 49 in March Amid Manufacturing and Industry Disruptions Caused by West Asia Conflict

India's Economic Activity Contracts in March Amid War in West Asia

India's economic activity declined in March as the ongoing war in West Asia exerted pressure on manufacturing and infrastructure output, according to the Moneycontrol Eco Pulse Index. The index slipped to 49 in March from 51.4 in the previous month, indicating a contraction in momentum.

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 Index 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.

Key Factors Contributing to the Contraction

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The biggest drag on the index 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.

The table above highlights the decline in key indicators, including the HSBC India Manufacturing PMI, core sector output growth, electricity demand growth, merchandise exports, and merchandise imports.

Support from Domestic Demand

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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.

Mixed Labour Market

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 lowered India's growth forecast to 6 percent compared with 6.8 percent projected earlier, due to the global oil shock arising out of the West Asia crisis. However, 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.