By Andrey Ostroukh

MOSCOW--Activity in Russia's manufacturing sector declined in March as production and new businesses shrank, the HSBC Manufacturing Purchasing Manager's Index showed Wednesday.

The headline manufacturing PMI index fell to 48.1 in March from 49.7 a month earlier, staying below the 50-point mark that separates growth from decline in activity.

HSBC said Russian manufacturers signaled a third successive monthly fall in purchasing activity due to working capital shortages and lower production requirements on the back of a decline in total new orders. At the same time, inflation in the sector slowed down.

"March's survey data indicated that operating conditions remained challenging overall, with output, new orders and employment all posting modest falls. Access to working capital also remains a hurdle to overcome for a number of manufacturers," Paul Smith, senior economist at Markit, said in the HSBC report.

The World bank said Wednesday that the Russian economy will contract by 3.8% in 2015--based on an average oil price of $53 a barrel--compared with its earlier forecast of a 0.7% contraction made in December.

Write to Andrey Ostroukh at andrey.ostroukh@wsj.com