Bengaluru: Growth in India’s dominant services industry eased last month from February’s 12-year high due to a softer expansion in demand, according to a private survey, which also showed input cost inflation falling to its lowest since September 2020.
The S&P Global India services Purchasing Managers’ Index fell to 57.8 last month from 59.4 in February, lower than a Reuters poll forecast of 58.3.
But it stayed above the 50-mark separating growth from contraction for a 20th consecutive month.
“India’s service sector built on to the momentum gained in February with further increases in new business intakes and output…However, manufacturing has retaken the mantle as the main driver of growth,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.
Manufacturing activity expanded at the fastest pace in three months during March, a separate survey released earlier this week showed, but the slowdown in services growth pulled a composite index down to 58.4 from 59.0 in February.
A sub-index tracking new business inflows in the services industry declined to 58.1 from 59.5 in February and firms hired at the slowest pace in 10 months, citing adequate capacity.
Future business expectations slipped to their lowest in eight months.
“Weakness was seen with regards to jobs…as a general lack of pressure on operating capacities and diminished confidence towards growth prospects prevented hiring activity,” De Lima said.
The softer outlook came despite input cost pressures easing to levels not seen in 2-1/2 years and better growth in foreign demand.
But service providers were able to pass on some of their additional cost burdens to clients thanks to resilient domestic demand, which in turn increased the pace of prices charged to their quickest in three months.
That suggested persistent price pressure. Overall inflation eased slightly to 6.44% in February, but remained above the Reserve Bank of India’s (RBI) 2%-6% target range.
Inflation is unlikely to return to the RBI’s 4.0% medium-term target any time soon, putting further pressure on the central bank, which is expected to hike its key repo rate by 25 basis points on Thursday.
(Reporting by Anant Chandak; Editing by Shri Navaratnam)