India's services growth hit a 14-month low in March, with the HSBC PMI at 57.5. The slowdown was driven by weaker domestic demand, though export orders remained strong. However, rising input costs reached their fastest pace since 2022.
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.
Factors Behind Slower Expansion
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.
Domestic Demand Weakens as Exports Surge
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.
Rising Costs and Expert Commentary
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.
Future Outlook Remains Optimistic
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.
(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)
