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India's Services Growth Slows to 14-Month Low in March, Inflation Rises

India's services sector expansion moderated in March, with the HSBC PMI dipping to 57.5, marking the slowest growth rate in 14 months. The slowdown was attributed to softer domestic demand, partly influenced by external factors like the Middle East conflict. However, export orders remained a significant bright spot, nearing a series record on strong international demand. The report also highlighted a sharp acceleration in input cost inflation, the fastest in nearly four years, even as business optimism for the future reached a 12-year high.

Key Points: India Services PMI Slows to 57.5, Inflation Pressures Build

  • Growth slows to 14-month low
  • Export orders near record high
  • Input cost inflation fastest since 2022
  • Business optimism at 12-year peak
  • Domestic new business growth weakens
2 min read

Services PMI eases to 57.5 in Mar from Feb's 58.1; Inflation pressures rise

India's services sector growth moderated in March as HSBC PMI fell to 57.5. Export demand remained strong, but input cost inflation hit a multi-year high.

"Demand remained resilient, led by new export orders... However, input cost inflation accelerated to its fastest pace since 2022. - Pranjul Bhandari"

New Delhi, April 6

India's services sector growth moderated in March, with the HSBC India Services PMI falling to 57.5 from 58.1 in February, signalling the slowest expansion in 14 months, according to a report released on Monday.

"Falling from 58.1 in February to 57.5 in March... indicated the weakest rate of expansion for 14 months," the report noted, while adding that the index remained above its long-run average of 54.4, highlighting continued overall growth.

The report attributed the softer expansion to a slowdown in new business inflows, even as international demand remained robust. "Output across India's service economy rose at the softest pace in 14 months... mirroring the slowdown in growth of new business intakes but comparing with a near-record expansion in international orders," it said.

According to survey participants, external factors weighed on demand conditions. "Output was constrained by the detrimental impact of the Middle East war on demand, market conditions and tourism," the report stated.

New business growth also weakened during the month. "Intakes of new work rose at the slowest pace since January 2025," the report said, with softer increases seen across key segments including finance, real estate, and transport.

Despite the moderation in domestic demand, export orders remained a bright spot. The report highlighted that "overall growth in foreign sales neared a series peak," supported by demand from regions such as Africa, Asia, Europe, and the Americas.

Commenting on the data, HSBC Chief India Economist Pranjul Bhandari said, "India's services sector stayed in expansion in March, but growth momentum eased for a second consecutive month."

She added, "Demand remained resilient, led by new export orders, which rose to the greatest extent since mid-2024... However, input cost inflation accelerated to its fastest pace since 2022."

The report also flagged rising cost pressures, noting that input prices increased at the fastest pace in close to four years, driven by higher fuel, transport, and food costs.

At the same time, businesses showed optimism about future activity. Firms were at their most upbeat towards the outlook for output in close to 12 years, supported by expectations of improved demand and market conditions.

Overall, while the services sector continued to expand in March, the data indicate a cooling in growth momentum alongside rising inflationary pressures.

- ANI

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Reader Comments

R
Rahul R
Export orders are a bright spot! Shows our services are competitive globally. The Middle East conflict is an external shock we can't control, but our businesses are still optimistic about the future. That's the spirit.
A
Aman W
Finance and real estate seeing softer growth is not a good sign. These are big employment generators. Need policies to boost domestic demand. The optimism for the future is good, but we need action now to control inflation.
S
Sarah B
Working in the IT sector, I can see the international demand firsthand. But the cost pressures are real. Salaries aren't rising as fast as living costs in metros like Bangalore or Hyderabad. The growth needs to be more inclusive.
K
Karthik V
A small dip from 58.1 to 57.5 is not a crisis. It's still expansion. The headline makes it sound worse than it is. The long-run average is 54.4, so we are doing well above that. Let's not panic.
M
Meera T
The impact on tourism mentioned is very true. Many are reconsidering travel plans due to global uncertainty. Hope things settle soon. On the positive side, demand from Africa and Asia growing is excellent for our long-term ties.

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