Services soar in March on strongest sales, business activity in nearly 14 years

Services activity in India accelerated in March following a small dip in February on buoyant new export orders, the HSBC India Purchasing Managers Index (PMI) compiled by S&P Global showed.

The seasonally adjusted index climbed to 61.2 in March, up from 60.6 in February, despite increased pressure on the capacity of service providers.

The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month and below 50 a decline.

March saw one of the strongest expansions in total sales and business activity in close to 14 years. Companies also reported strong growth in new orders during March, marking one of the best performances since June 2010.

“India’s services PMI rose in March, following a small dip in February, on strong demand that spurred sales and business activity. Service providers increased hiring at the fastest pace since last August to expand production capacity. Input costs rose at a faster rate, yet service providers were able to broadly maintain margins by charging higher output prices,” HSBC economist Ines Lam said.

March data showed better demand for Indian services from domestic and international sources, with new export business rising at the fastest rate since the series started in September 2014 as companies reported gains from Africa, Asia, Australia, Europe, the Americas and the Middle East.

The survey showed quicker increases in output and sales across each of the broad areas of the service economy monitored, with finance and Insurance topping the growth rankings in both cases.

The sectors the survey covers include consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services.

Services firms reported an increase in expenses on higher labour and material costs. The combination of rising cost pressures and robust demand helped companies lift their selling prices in March, the survey showed.

Meanwhile, data for the month pointed to a sharp increase in aggregate output, as both goods producers and service providers noted a pick-up in growth.

The HSBC India Composite PMI Output Index rose from 60.6 in February to 61.8 in March, highlighting the second-strongest upturn in over 13-and-a-half years, after July 2023.

Manufacturers posted a quicker increase in sales than service providers, despite growth also accelerating among the latter. At the composite level, new business intakes expanded to the greatest extent since mid-2010, matched only by July 2023’s level.

Selling price inflation rose to a five-month high and outpaced its long-run average, solely due to a notable acceleration in the service economy as factory gate charges rose to a lesser extent.

Correction: The headline and lead paragraph have been edited to reflect that the services sector accelerated in March on strong sales and following a small dip in February.