India's Services PMI Drops To 57.8 In March From February's 12-Year High Of 59.4

The services PMI, which at 57.8, is now above the key level of 50 that separates expansion in activity from a contraction for 20 months in a row

India's services sector expanded again in March, despite the sector's Purchasing Managers' Index (PMI) dropped to 57.8 from February's 12-year high of 59.4, data released by S&P Global on Wednesday revealed.

The services PMI, which at 57.8, is now above the key level of 50 that separates expansion in activity from a contraction for 20 months in a row. The services PMI data comes a couple of days after the manufacturing PMI rose to a three-month high of 56.4 in March. The composite PMI, which is a combination of the manufacturing and services indices, declined to 58.4 in March from 59.0 in February.

In a statement, &P Global said, "Despite falling from 59.4 in February and thereby indicating a slower rate of expansion, the latest figure was consistent with a substantial uptick in output.” The impact of robust foreign demand for India' services, reflected in record services exports, was reflected in the PMI data, with S&P Global saying that the rise in overall new business was supported by an increase in global sales.

"Companies commonly mentioned an improvement in external demand for their services," S&P Global said.

Despite the robust PMI number, the employment situation saw little improvement in March.

Pollyanna De Lima, economics associate director at S&P Global Market Intelligence, said, "Weakness was seen with regards to jobs, with broadly no change in employment seen neither in services nor in manufacturing as a general lack of pressure on operating capacities and diminished confidence towards growth prospects prevented hiring activity,” while adding, "More firms in both sectors anticipate no change in future output from present levels.”

In terms of price pressures, service providers' responses showed a further increase in input prices, although the rate of inflation was the lowest in two-and-a-half years. Service firms, however, continued to pass on higher costs to consumers, with selling prices rising at a three-month high in March.

On the whole, while service providers were optimistic about output increasing in the coming year, "The overall level of positive sentiment fell to an eight-month low as several firms foresee no change in activity from present levels", S&P added.