“India’s service sector built on to the momentum gained in February with further increases in new business
intakes and output at the end of the 2022/23 fiscal quarter. Input price pressures in the service economy continued to subside, alongside the trend seen in manufacturing. Hence, the aggregate rate of input cost inflation moderated to a two-and-a-half-year low,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.
Data released earlier this week showed manufacturing activity expanded at the fastest pace in three months during March but the slowdown in services growth pulled a composite index down to 58.4 from 59.0 in February.
Despite rising for the tenth month in a row, the survey said, services employment grew only factionally in March. Close to 98% of survey participants left payroll numbers unchanged amid sufficient staff levels for current requirements.
“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.
Service providers, according to the survey, were on average optimistic that output would expand in the year ahead.
However, overall price pressure remained. Service providers, the survey said, 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.
Overall inflation had 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, according to analysts. The Reserve Bank is widely expected to hike its key repo rate by 25 basis points on Thursday.