India's Services Sector Growth Slows in March, but Remains Robust

India's services sector experienced a slight deceleration in March as the PMI fell slightly from February. Despite challenging conditions, demand remained resilient, and overall activity continued to grow. Inflation eased and competitive pressures rose, affecting business confidence and hiring activities.

The activity in India's services sector witnessed a slight deceleration in March, according to a monthly survey. This slowdown is attributed to softer demand conditions and easing inflationary pressures, causing the HSBC India Services PMI Business Activity Index to dip from February's 59.0 to 58.5, albeit remaining well above the long-run average of 54.2.

Pranjul Bhandari, Chief India Economist at HSBC, noted that both domestic and international demand were buoyant, though slightly lower than the previous month. While new business continued to grow, the pace of sales growth softened, with international sales at a 15-month low. Competition was identified as a critical challenge for future growth.

Inflation on output charges hit a three-and-a-half-year low, and less than 1% of survey participants reported higher fees. Consumer Services firms remained optimistic, leading the sector, followed by Finance & Insurance. Though employment rates increased, they slowed to the lowest pace in nearly a year, reflecting broader economic trends. The composite PMI showed continued growth at a seven-month high driven by new orders.