India’s services sector recorded the strongest growth since December 2021, as per the S&P Global India Services Purchasing Managers’ Index (PMI), which rose from 51.8 in February to 53.6 in March. A score of 50 on the PMI indicates no change in business activity.
On a quarterly basis, however, January-March 2022 recorded the weakest period for services players in 2021-22, with an average reading of 52.3, falling significantly from the 57.4 reading in the previous quarter.
Input costs increased at the sharpest pace in 11 years in March 2022, as operating expenses were driven up by higher chemical, fuel, raw material, retail, transportation and vegetable prices.
The Services PMI also signals a further decline in service sector jobs during March, though the rate of contraction slowed down. While some services firms passed on a part of the higher input costs, consumers are likely to face soaring prices in the coming months as cost burdens rise.
Greater consumer footfall due to the relaxation of COVID-19 restrictions boosted contact-intensive services, but domestic sales drove most of the growth in services as new export orders fell further.
The contraction in new export orders was sharp and the fastest since last September, and Inflation risks continued to curb business optimism regarding growth prospects going forward.
For the first time in seven months, input price inflation was more acute in the service economy than in the manufacturing industry. Across the private sector, cost burdens rose at the sharpest pace in almost a decade, S&P Global said.
“The war in Ukraine exacerbated lingering issues in supply chains, triggering a reacceleration in inflation across the Indian service economy. The March results showed the sharpest upturn in input costs for 11 years, but this did not put a brake on the recovery of the sector,” said the firm’s economics associate director Pollyanna De Lima.
While consumers were eager to go out and spend as pandemic restrictions were eased. Ms. De Lima noted that inflation risks continued to curb business optimism regarding growth prospects, with sentiment among services companies remaining subdued by historical standards.
“This lack of confidence in the outlook also meant that employment continued to fall in March,” she emphasised. Within services, finance and insurance had the best month in sales and output, while real estate and business services were the weakest link, recording sharper declines in new orders and activity.
Consumer services recorded the strongest increase in input costs, while transport, information and communication registered the sharpest rate of charge inflation, S&P Global said in a note about the PMI survey, which is based on responses from 400 firms.
Taking the services and manufacturing sectors together, aggregate output growth hit a three-month high, with the S&P Global India Composite PMI Output Index inching up from 53.5 in February to 54.3 in March.
