New Delhi: India’s services sector posted a lower growth momentum in March amidst sustained rise in flow of new orders and output, as per the S&P Global India Services Purchasing Managers’ Index (PMI) released on Wednesday. The PMI Services Index dropped from 59.4 in February to 57.8 in March but remained in growth territory (above 50.0) for the 20th successive month. The latest figure was consistent with a substantial uptick in output as favourable demand conditions and new business gains jointly drove the latest rise, according to S&P.
The PMI Index shows strong increases in private sector new business and activity as private sector sales rose for the 20th consecutive month in March, amid sustained increases at goods producers and service providers. The overall pace of expansion in both cases sharp and substantial, despite easing from February. There were adequate capacities for current requirements, a factor that curbed job creation.
According to 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 with companies benefiting from an improvement in external demand for their services.
As has been the case for three successive months, all four broad areas of the service economy registered growth of new business and output.consumer services topped the rankings again on both fronts, while the slowest increases were seen in real estate and business services.
Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence notes that 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. Input price pressures in the service economy continued to subside, alongside the trend seen in manufacturing. Still, a sizeable proportion of services firms hiked their selling prices to hedge against rising costs, emboldened by favourable demand conditions. The rate of charge inflation was moderate but quickened since February, a trend that was matched by manufacturing,” said De Lima.
The overall rate of input price inflation softened to its lowest since September 2020, even as Indian services firms suggested further increase in input prices amid reports of higher food, fuel, transportation and wage costs. However, with a large proportion of survey participants signalling no change in expenses since February, the overall rate of inflation was mild and the weakest in two- and-a-half years. 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.
According to the survey report, capacity pressures remained mild overall, as signalled by a slight increase in outstanding business volumes. The rise in backlogs nevertheless took the current stretch of accumulation to 15 months. However, services employment grew only factionally in March despite rising for the 10th month in a row. Close to 98 per cent of survey participants left payroll numbers unchanged amid sufficient staff levels for current requirements.
Assessments towards growth prospects by service providers, on an average, suggest optimism that output would expand in the year ahead, with demand strength and marketing efforts supporting the 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.