While the Indian economy continues to hold its ground despite facing a major supply shock due to the conflict in West Asia, early signs of deceleration are evident in select economic indicators such as port cargo, air passenger traffic and the outlook of purchasing managers, according to an article in RBI’s latest monthly bulletin.
The “State of the Economy” article, put together by RBI officials, also underscored that though inflation remains contained within the tolerance band, upside risks have increased, driven by supply-side disruptions, including weather-related uncertainties.
Possible second round effects, with the supply shock transforming itself into demand shock, also warrant careful and continuous assessment, said the authors.
Divergent trends
In March, available high-frequency indicators of economic activity displayed divergent trends: demand conditions remained resilient, despite some pockets of slowdown in economic momentum, per the article.
RBI’s forward looking surveys pointed towards softening consumer confidence on the current situation and moderation in business optimism along with buildup of cost pressures.
The authors said the manufacturing PMI (purchase managers’ index), albeit in expansionary zone, declined to its lowest level in nearly four years. Cost pressures and uncertainty took a toll on new orders and output, which grew at the slowest rates since mid-2022.
Services PMI
The services PMI showed resilience, although, its pace of expansion slowed to a 14-month low, reflecting softening in new business.
The index of eight core industries also declined, marking its 19-month low, driven by a decline in production of fertilizers, crude oil, coal, and electricity, the authors said.
The PMI data for March revealed an intensification of input cost pressures across both manufacturing and services firms, the article said.
The increase in output prices, however, moderated for manufacturing firms, reflecting competition to retain customers and secure new clients, and a softer increase in new orders.
In contrast, prices charged by services firms continued to increase, aided by a near record expansion in international orders offsetting the domestic business slow down.
Published on April 23, 2026