India’s services sector continued to grow in March, with the Services PMI (Purchasing Managers’ Index) rising for the 20th consecutive month. However, the reading for March was lower than the one recorded in February, indicating a slight slowdown in the pace of growth.
According to the latest data from IHS Markit, the Services PMI for March was 54.6, down from 55.3 in February. Despite the slight decline, the index remained well above the 50-point mark, which separates growth from contraction.
The rise in the Services PMI was driven by increased business activity, with firms reporting higher sales volumes and new business orders. However, the rate of expansion was slower than in February, with firms citing a range of factors, including rising COVID-19 cases and supply chain disruptions.
Commenting on the latest data, Pollyanna De Lima, Economics Associate Director at IHS Markit, said, “March data highlights a slowdown in the Indian service sector growth, with the rate of expansion easing since February. However, the overall performance of the sector was still positive, with new business orders continuing to increase, leading firms to expand workforce numbers.”
The Services PMI is based on a survey of around 400 service sector companies in India, covering sectors such as transport and communication, financial intermediation, hotels and restaurants, and business services. The index provides an indication of the overall health and performance of the services sector.
The Services PMI is a composite index, with components chosen to capture different aspects of service activity. Components are weighted according to their relative importance in the total services activity. The components include output, new orders, employment and supplier delivery times.
The survey also found that employment in the services sector increased for the fourth consecutive month in March. The rate of job creation was the fastest since January 2020, with firms hiring additional staff to meet rising demand for their services. The services sector is the largest employer in India, accounting for about 60 percent of the country’s workforce.
The manufacturing sector also showed signs of recovery, with employment rising for the first time since December 2019. This was driven by an increase in output and new orders, indicating that businesses are regaining some confidence. The construction industry also saw a modest improvement, as employment increased for the third consecutive month.
However, the survey also highlighted ongoing challenges facing the sector, including rising input costs and supply chain disruptions. Input prices increased at the fastest pace since November 2018, with firms citing higher fuel and transportation costs, as well as increased prices for raw materials.
Meanwhile, supply chain disruptions continued to hamper the sector, with firms reporting delays in receiving inputs and longer delivery times. This was linked to a range of factors, including COVID-19 restrictions, logistical challenges, and global supply chain disruptions.
The services sector is a key driver of the Indian economy, accounting for around 55% of GDP. The sector has been hit hard by the COVID-19 pandemic, with lockdowns and travel restrictions leading to a sharp contraction in activity in 2020.
However, the sector has rebounded strongly in recent months, driven by a combination of pent-up demand, fiscal stimulus measures, and a gradual easing of COVID-19 restrictions.
The latest data suggests that the sector is continuing to recover, albeit at a slightly slower pace than in February. However, the ongoing challenges facing the sector, including rising input costs and supply chain disruptions, suggest that the road to full recovery may be bumpy.
In conclusion, while India’s services PMI has increased for the 20th consecutive month, the slight decline in the reading for March suggests a slight slowdown in the pace of growth. The ongoing challenges facing the sector, including rising input costs and supply chain disruptions, highlight the need for continued policy support to ensure a sustained and robust recovery.
