Despite a loss of momentum, services sector activities remained robust in March due to favourable demand conditions and new business gains.
The seasonally adjusted S&P Global India Services PMI Business Activity Index eased to 57.8 in March from 59.4 in the previous month but remained in growth territory (above 50) for the twentieth successive month.
“India’s service sector built on to the momentum gained in February with further increases in new business intakes 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 at S&P Global Market Intelligence, said.
“Input price pressures in the service economy continued to subside, alongside the trend seen in manufacturing. Hence, the aggregate rate of input cost inflation moderated to a two-and-a-half-year low.”
At the composite level, private sector output in India increased for the twentieth successive month in March, even though the S&P Global India Composite PMI Output Index fell from 59 in February to 58.4 in March.
Backed by demand buoyancy, service providers shared part of their additional cost burdens with clients in March via an upward revision to selling prices.
According to the PMI survey members, demand resilience, competitive pricing and marketing efforts warranted a further uptick in sales. The rise in overall new business was supported by an increase in international sales. Companies commonly mentioned an improvement in external demand for their services.
The seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) rose from 55.3 in February to 56.4 in March, signalling the strongest improvement in operating conditions in 2023 so far, and demand resilience. The March PMI data pointed to an improvement in overall operating conditions for the 21st straight month. In PMI parlance, a print above 50 means expansion while a score below 50 indicates contraction.
PMI-manufacturing and GST receipts are the last set of macro-economic data to be released before the meeting of the Monetary Policy Committee on April 3-6. Most analysts predict a 25 basis points hike in the repo rate to 6.75% given the persistently high retail inflation, though economic growth is expected to be just around 4% in the fourth quarter and remain subdued in the current quarter and the next too.