India's Services Growth Cools in March Amid Softer Demand, Weak Hiring, and Easing Inflation
Friday, 04 April 2025, 12:00 IST
The fast growth in India's leading services industry slowed a bit in March on softer demand, even as companies increased prices at the weakest pace in three-and-a-half-years, a survey also indicated deceleration in employment generation.
The HSBC preliminary India Services Purchasing Managers' Index, prepared by S&P Global, declined to 58.5 in March from 59.0 in February, but was above an initial estimate of decline to 57.7.
But it was still well above the 50-mark that divides growth from contraction.
"Domestic and export demand were quite resilient, albeit sequentially a notch below the previous month", HSBC chief India economist Pranjul Bhandari said.
Domestic demand continued to be a driving force, with new business posting solid expansion, though at a less fervent rate than in February.
Foreign demand eased and international orders increased at the weakest rate in 15 months, indicating possible vulnerabilities to global economic changes such as from US President Donald Trump's newly announced tariff policies.
Inflationary pressures eased with input cost inflation increasing at its weakest rate in five months. That, combined with fierce competition, resulted in the lowest rise in output prices since September 2021.
The competitive environment dragged on business sentiment for the next year and the future activity index cooled to a seven-month low, impacting employment growth. The rate of hiring more staff eased to the weakest in nearly a year.
"Forward looking, business optimism is still largely positive, but rising competition poses a major challenge to most survey respondents", said Bhandari.
The HSBC India Composite PMI, which comprised strong manufacturing expansion, increased to a seven-month high of 59.5 in March from 58.8 in February, indicating faster overall private sector expansion.
Manufacturing expansion surpassed services, but both sectors experienced slowing employment growth and business optimism.
Weaker inflation and weak business confidence may force the Reserve Bank of India to lower interest rates for the second time, by 25 basis points on April 9, to help an economy that most probably grew at its weakest rate in four years last fiscal year.
The HSBC preliminary India Services Purchasing Managers' Index, prepared by S&P Global, declined to 58.5 in March from 59.0 in February, but was above an initial estimate of decline to 57.7.
But it was still well above the 50-mark that divides growth from contraction.
"Domestic and export demand were quite resilient, albeit sequentially a notch below the previous month", HSBC chief India economist Pranjul Bhandari said.
Domestic demand continued to be a driving force, with new business posting solid expansion, though at a less fervent rate than in February.
Foreign demand eased and international orders increased at the weakest rate in 15 months, indicating possible vulnerabilities to global economic changes such as from US President Donald Trump's newly announced tariff policies.
Inflationary pressures eased with input cost inflation increasing at its weakest rate in five months. That, combined with fierce competition, resulted in the lowest rise in output prices since September 2021.
The competitive environment dragged on business sentiment for the next year and the future activity index cooled to a seven-month low, impacting employment growth. The rate of hiring more staff eased to the weakest in nearly a year.
"Forward looking, business optimism is still largely positive, but rising competition poses a major challenge to most survey respondents", said Bhandari.
The HSBC India Composite PMI, which comprised strong manufacturing expansion, increased to a seven-month high of 59.5 in March from 58.8 in February, indicating faster overall private sector expansion.
Manufacturing expansion surpassed services, but both sectors experienced slowing employment growth and business optimism.
Weaker inflation and weak business confidence may force the Reserve Bank of India to lower interest rates for the second time, by 25 basis points on April 9, to help an economy that most probably grew at its weakest rate in four years last fiscal year.
