India's services activity was off its 12-year high in March, signalling a modest loss in growth even as it continued to expand for the 20th straight month, according to a monthly survey.
The seasonally adjusted S&P Global India Services PMI Business Activity Index eased from 59.4 in February to 57.8 in March, the survey said. A reading above 50 indicates expansion in business activity, while one below it signals contraction.
Despite falling from 59 in February to 58.4 in March, the S&P Global India Composite PMI Output Index pointed to a sharp rate of expansion that was above its long-run average. However, it also indicates a slower rate of expansion.
The latest figure was consistent with a substantial uptick in output, the release stated, citing favourable demand conditions and new business gains among the reasons for the latest rise.
India's service sector built on the momentum gained in February with further increases in new business intake and output at the end of the 2022–23 fiscal quarter. However, manufacturing has retaken the mantle as the main driver of growth.Pollyanna De Lima, Economics Associate Director, IHS Markit
Similar to output, new business inflows increased at a softer but still sharp rate in March. Demand resilience, competitive pricing, and marketing efforts warranted a further uptick in sales, survey members said.
The rise in overall new business was supported by an increase in international sales. Companies commonly mention an improvement in external demand for their services.
There was a further increase in input prices at Indian service firms, amid reports of higher food, fuel, transportation, and wage costs. Backed by demand buoyancy, service providers shared part of their additional cost burdens with clients in March via an upward revision to selling prices. The rate of charge inflation picked up to a three-month high but was moderate and below that seen for input prices.
Despite rising for the tenth month in a row, employment in services grew only fractionally in March. Close to 98% of survey participants left payroll numbers unchanged amid sufficient staff levels for current requirements.
When providing their assessments of growth prospects, service providers were on average optimistic that output would expand in the year ahead. Demand strength and marketing efforts were the main factors supporting business confidence. Nevertheless, the overall level of positive sentiment fell to an eight-month low as several firms foresee no change in activity from present levels.
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