Bengaluru: Growth in India’s core services industry slowed last month from February’s 12-year high on a softer expansion in demand, with input cost inflation falling to its lowest level since September 2020, according to a private survey.
The S&P Global India Services Purchasing Managers’ Index fell to 57.8 last month from 59.4 in February, below a Reuters poll estimate of 58.3.
But it remained above the 50-mark for the 20th straight month separating growth from contraction.
Pollyanna de Lima, associate director of economics at S&P Global Market Intelligence, said, “India’s services sector looks poised to gain momentum in February with a further increase in new business intake and output… However, manufacturing provided the main driver of growth.” Returned as driver. ,
Manufacturing activity expanded at the fastest pace in three months during March, a separate survey released earlier this week showed, but a slowdown in services growth dragged the overall index down to 58.4 from February’s 59.0.
A sub-index tracking new business flows into the services industry fell to 58.1 from 59.5 in February and firms hired at the slowest pace in 10 months, citing insufficient capacity.
Future business expectations fell to the lowest in eight months.
“Weakness was observed with respect to jobs … a general lack of pressure on operating capacities and low confidence in growth prospects restrained hiring activity,” De Lima said.
The softening outlook came despite input cost pressures easing to levels not seen in 2-1/2 years and better growth in overseas demand.
But service providers were able to pass on some of their additional cost burden to customers thanks to resilient domestic demand, which in turn pushed prices up to their sharpest in three months.
This suggested continued price pressure. Overall inflation eased slightly to 6.44% in February, but remained above the Reserve Bank of India’s (RBI) target range of 2%-6%.
Inflation is unlikely to return to the RBI’s 4.0% medium-term target anytime 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 Mr Navaratnam)