Services sector growth in India eased marginally due to rise in input costs during March, but new business orders showed improvement and staffing levels of the companies also increased, an HSBC survey said today.
The HSBC India Services Business Activity Index, which tracks changes in activity at Indian service companies on a monthly basis, eased to 53.0 in March from 53.9 in February, indicative of a moderate rate of expansion that was slightly weaker than in the prior month.
A score above 50 indicates that the sector is expanding, while a figure below that level means contraction.
Input prices faced by services firms rose further in March. The rate of cost inflation was solid and the strongest since June 2014.
“Increased petrol and transport prices were reported by panelists to have contributed to the overall rise in cost burdens,” the HSBC survey compiled by Markit said.
Markit Economist Pollyanna De Lima said “despite softening slightly since February, growth of activity and new business in the country’s dominant sector was robust.”
He further said that India’s service sector ended the first three months of 2015 with a strong performance, providing signals that much of the weakness seen in 2014 has been left behind.
“These figures taken in conjunction with manufacturing mark a good quarter for businesses,” Lima added.
On the employment front, service sector employment rose during March and private sector labour market saw payroll numbers stabilise during the month.
Going forward, with unfinished business rising at a faster rate, companies will likely to start hiring in coming months, Lima said.
Meanwhile, service providers remained upbeat towards the prospects for business activity in 12 months’ time.
On prices, HSBC said the cost inflationary pressures in the private sector as a whole firmed during March.
Meanwhile, inflation measured on wholesale price index (WPI) was at (-) 0.39 per cent in January, (-) 0.50 per cent in December and (-) 0.17 per cent in November, respectively.
With inflation dropping to record lows, industry is demanding further easing of interest rates to boost growth.
Last month, the Reserve Bank had surprised markets by reducing the benchmark interest rate by 0.25 per cent to 7.5 per cent.
The headline HSBC India Composite PMI Output Index — that maps both manufacturing and services sector output fell marginally from 53.5 in February to 53.2 in March.