Representative image of a graph going upward.
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New Delhi: India’s services sector, which accounts for nearly 58% of the country’s economy, recorded its strongest expansion in nearly 14 years in the month of March on the back of robust demand that spurred sales and business activities, an industry survey conducted by S&P Global showed on Thursday.
“March saw one of the strongest expansions in total sales and business activity in close to 14 years, helped by a series record upturn in new export orders,” S&P Global said in its latest Purchasing Managers’ Index (PMI) services report.
India’s services PMI rose to 61.2 in March from 60.6 recorded in the previous month. The PMI reading above 50 indicates growth in the sector while below 50 shows contraction. India’s services PMI has been above the 50-mark for 32 months in a row.
March data showed better demand for Indian services from domestic as well as international sources. New export business rose at the fastest rate since the series started in September 2014. Strong demand for Indian services was reported from Africa, Asia, Australia, Europe, the Americas and the Middle East.
Services companies increased hiring in March to meet the pressure of a substantial uptick in new business volumes. “Service providers increased hiring at the fastest pace since August 2023 in order to expand production capacity,” said Ines Lam, economist at HSBC.
While there was good news on hiring, services inflation also increased. Overall expenses at services firms jumped due to higher labour and material costs.
“Input costs rose at a faster rate, yet service providers were able to broadly maintain margins by charging higher output prices,” Lam said.
The combination of rising cost pressures and demand strength encouraged companies to lift their selling prices in March. “The rate of charge inflation climbed to its highest mark since July 2017,” the rating agency noted in the report.
According to another data released by S&P Global earlier this week, India’s manufacturing PMI rose to the highest level in 16 years on the back of a sharp increase in new orders and input stocks.
March data pointed to a sharp increase in aggregate output across India, as both goods producers and service providers noted a pick-up in growth.
The survey, which is based on responses of around 400 service sector companies spread across the country, noted that business sentiment remained strongly positive. Firms expect demand trends to remain favourable, with marketing efforts also seen as a growth opportunity. There were, however, some concerns surrounding competitive pressures.