India services growth eases to 14-month low in March; cost pressures intensify: PMI

India’s services sector growth moderated to a 14-month low in March as softer domestic demand and rising costs weighed on activity, a monthly survey showed on Monday.

The seasonally adjusted HSBC India Services PMI Business Activity Index fell to 57.5 in March from 58.1 in February, indicating the slowest expansion in output since January 2025.

However, it remained well above the long-run average of 54.4.

The slowdown in activity mirrored softer growth in new business inflows, which rose at the weakest pace since January 2025 amid concerns over the impact of West Asia conflict on demand, market conditions and tourism, the survey said.

However, international demand remained a bright spot, with new export orders rising at one of the fastest rates on record, supported by demand from regions including Asia, Europe, the Americas and the Middle East.

“India’s services sector stayed in expansion in March, but growth momentum eased for a second consecutive month,” said Pranjul Bhandari, chief India economist at HSBC.

She added that strong export demand helped keep business expectations positive.

However, input cost inflation accelerated to its fastest pace since 2022, indicating that higher fuel, transport and logistics costs are feeding into services, she added.

Service providers passed on part of the cost burden to customers, with selling price inflation accelerating to a seven-month high, the report added.

The survey also showed continued improvement in employment, with firms increasing hiring for the third straight month at the strongest pace since mid-2025, supported by improved business confidence.

At the composite level, which combines manufacturing and services, the PMI Output Index declined to 57.0 in March from 58.9 in February, marking the weakest expansion in nearly three-and-a-half years.

Overall, while India’s private sector activity remained firmly in growth territory, the moderation in domestic demand and rising cost pressures signalled emerging headwinds for the economy at the end of FY26.