India's Services Sector Growth Eases to 14-Month Low

India's services sector growth experienced a slowdown in March, according to the latest HSBC India Services PMI, raising concerns about the impact of rising input costs and weaker new business on the overall economy.

India's services sector growth momentum rose at the softest pace in 14 months in March, mirroring the slowdown in new business intakes, a monthly survey said on Monday.

The seasonally adjusted HSBC India Services PMI Business Activity Index fell from 58.1 in February to 57.5 in March, amid the weakest rises in new business and activity since January 2025.

In the Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

"India's services sector stayed in expansion in March, but growth momentum eased for a second consecutive month. Demand remained resilient, led by new export orders, which rose to the greatest extent since mid-2024. As such, service providers' expectations for future activity remained positive," said Pranjul Bhandari, Chief India Economist at HSBC.

However, the services sector recorded quicker expansions in new export orders. Panellists noted gains from Africa, Asia, Australia, Europe, the Americas and the Middle East.

Rising Costs and Inflation

On the price front, selling charge inflation quickened to a seven-month high amid the steepest increase in input costs since June 2022. According to panel members, outlays on chicken, cooking oil, eggs, electricity, fish, fruits, fuel, labour, meat and vegetables all rose since February.

"... Input cost inflation accelerated to its fastest pace since 2022, indicating that higher fuel, transport and logistics costs are feeding into services," Bhandari said.

Out of the four broad areas of the service economy monitored by the survey, the quickest increases in input costs and output charges were seen in Consumer Services and Finance & Insurance, respectively, the survey noted.

Employment and Business Confidence

Regarding employment, the latest results showed a third consecutive monthly increase. Moreover, the pace of job creation was solid and the strongest since mid-2025 amid a pick-up in business confidence.

"Firms were at their most upbeat towards the outlook for output in close to 12 years. Optimism was pinned on hopes of an improvement in demand and market conditions. Advertising and better customer relations were also expected to bear fruit," the survey noted.

Composite PMI Output Index

Meanwhile, the HSBC India Composite PMI Output Index fell from 58.9 in February to 57.0, indicating the weakest rate of expansion in nearly three-and-a-half years.

Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors according to official GDP data.

With new orders rising at softer rates among both goods producers and service providers, overall sales increased at the weakest pace since November 2023. Data implied that the slowdown was centred on the domestic market as international demand for Indian goods and services improved to the greatest extent in seven months.

Cost pressures across the private sector were at their most intense in just under four years. While services firms raised selling prices to a greater extent, manufacturers signalled the weakest uptick in two years. At the composite level, the rate of inflation was little changed from last month.

The HSBC India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.