India's Services Sector Sees Strongest Growth In Over 13 Years; PMI Rises To 61.2 In March

India's Services PMI: The notable upturn was predominantly attributed to robust demand conditions, efficiency enhancements, and positive sales trends, as outlined in the survey

India's services sector witnessed one of its most robust growth rates in over 13-and-a-half years in March, driven by heightened demand stimulating sales and business activity, as per a monthly survey released on Thursday. The seasonally adjusted HSBC India Services Business Activity Index soared from 60.6 in February to 61.2 in March, marking one of the most substantial expansions in total sales and business activity in nearly 14 years.

According to the Purchasing Managers' Index (PMI), a figure above 50 signifies expansion, while a score below 50 indicates contraction. Compiled by S&P Global from responses to questionnaires sent to a panel of about 400 service sector companies, the HSBC India Services PMI registered the surge.

Ines Lam, economist at HSBC, commented, "India's services PMI rose in March, following a small dip in February, on the back of strong demand that spurred sales and business activity. Service providers increased hiring at the fastest pace since August 2023 in order to expand production capacity."

The notable upturn was predominantly attributed to robust demand conditions, efficiency enhancements, and positive sales trends, as outlined in the survey. March saw companies signalling a significant improvement in new order intakes, with the growth rate ranking among the highest since June 2010.

Furthermore, new export business surged at the fastest pace since September 2014, with participants reporting gains from various global regions. However, the substantial upturn in new business volumes exerted pressure on capacities, prompting service providers to recruit additional staff in March.

Regarding pricing dynamics, the survey revealed an intensification of price pressures, with both input costs and output charges escalating at accelerated rates. Despite this, service providers managed to broadly maintain margins by implementing higher output prices.

Looking ahead, services companies anticipate favourable demand trends, with marketing efforts identified as a growth opportunity. Nonetheless, concerns persist regarding competitive pressures.

Simultaneously, the HSBC India Composite PMI Output Index climbed from 60.6 in February to 61.8 in March, marking the second-strongest upturn in over 13-and-a-half years.

Composite PMI indices, reflective of the relative size of the manufacturing and service sectors according to official GDP data, witnessed a sharp increase in aggregate output across India in March, with both goods producers and service providers noting a growth acceleration.