New Delhi, April 3 -- India's manufacturing engine cooled to its slowest pace in nearly four years in March, as cost pressures and the West Asia war hurt orders and output in the world's fastest-growing major economy. The HSBC India Manufacturing Purchasing Managers' Index (PMI) fell to 53.9 in March from 56.9 in February, its lowest level since June 2022, underscoring a softening in domestic momentum. The PMI reading remains above the 50-mark that separates expansion from contraction. "Disruptions linked to the conflict in the Middle East are reverberating through the global economy and weighing on Indian manufacturers," said Pranjul Bhandari, chief India economist at HSBC. "Output and new orders slowed noticeably, signalling softer demand and greater uncertainty." The slowdown was driven by the index's two largest sub-components: new orders and output, both of which grew at their slowest rates since mid-2022. Manufacturers cited a combination of "challenging market conditions" and heightened geopolitical risk as primary obstacles to growth. Inflation reared its head during the month. Input costs rose sharply across a broad range of commodities, including aluminium, chemicals and fuels, in the sharpest increase in expenses since August 2022. However, firms largely absorbed the higher input costs-there was only a modest uptick in selling prices, the weakest increase in two years. According to economists, sustained input cost pressures and the risk of intermittent shortages may raise inflation. While the economy remains resilient, it is increasingly exposed to external shocks and the risk of persistent inflation, said Rishi Shah, partner and economic advisory services leader, Grant Thornton Bharat. "The slowdown is not domestic in origin alone; escalating disruptions in West Asia are now transmitting across the value chain through elevated energy prices, freight costs and supply-side frictions," Shah said. "What is particularly striking is the rise in uncertainty. Market participants, by and large, continue to price in a short-lived conflict, yet firms on the ground appear to be recalibrating expectations more cautiously. This divergence between financial market optimism and real economy behaviour could amplify volatility in the coming months," he added. Despite the domestic cooling, external demand provided some relief. Manufacturers recorded the strongest expansion in export orders since last September, with significant gains reported from clients in Europe, Japan, mainland China and West Asia. On the hiring side, the mood remained optimistic. Companies raised employment at the fastest pace in seven months. In a positive development, outstanding business volumes fell for the first time in nearly 18 months. The survey attributed this to additional hiring and a softer rise in new orders, which helped clear backlogs. The PMI data follows a shift in India's national accounts; under a new gross domestic product (GDP) series released in February with 2022-23 as the base year, manufacturing has been a standout performer. The sector is projected to grow 11.5% in the current financial year, even as analysts watch for signs that the West Asian conflict may recalibrate the expectations of "real economy" participants....