Output across India’s services sector expanded at its slowest pace in 14 months in March, reflecting a moderation in new business growth even as international demand remained robust. 

The seasonally adjusted HSBC India Services PMI Business Activity Index declined to 57.5 in March from 58.1 in February, marking the weakest expansion since early 2025. However, the index stayed well above its long-run average of 54.4, indicating continued growth in the sector. 

Demand resilient, but headwinds persist 

While new business continued to support activity, growth was partly constrained by the adverse impact of the Middle East conflict on demand, market conditions, and tourism. 

Pranjul Bhandari, Chief India Economist at HSBC, said, “India’s services sector stayed in expansion in March, but growth momentum eased for a second consecutive month. Demand remained resilient, led by new export orders, which rose to the greatest extent since mid-2024.” 

New business inflows increased at the slowest pace since January 2025, with softer demand observed across key segments such as Finance & Insurance, Real Estate & Business Services, and Transport, Information & Communication. 

Export demand near record highs 

On the other hand, export orders strengthened across all four major service categories, with overall foreign sales growth nearing a record high. Since data collection began in September 2014, only June 2024 recorded a faster rise. Panelists reported strong demand from regions, including Africa, Asia, Australia, Europe, the Americas, and the Middle East. 

Input costs surge, prices rise 

Cost pressures intensified sharply during the month, with input prices rising at the fastest pace since June 2022. Higher expenses for fuel, transport, logistics, and food items such as cooking oil, vegetables, and meat contributed to the surge. 

As a result, services companies raised selling prices at the fastest pace in seven months, passing on part of the cost burden to customers while absorbing some internally. The gap between input cost inflation and output price inflation widened to its highest since July 2023. 

Among sectors, Consumer Services recorded the steepest rise in input costs while Finance & Insurance saw the sharpest increase in output charges. 

Employment in the services sector rose for the third consecutive month, with the pace of job creation accelerating to its strongest level since mid-2025. 

Business confidence also improved significantly, reaching its highest level in nearly 12 years. Firms cited expectations of stronger demand, better market conditions, increased advertising, and improved customer relations as key drivers of optimism. 

At the aggregate level, the HSBC India Composite PMI Output Index fell to 57.0 in March from 58.9 in February, indicating the slowest pace of expansion in nearly three-and-a-half years. 

The moderation was driven by softer growth in both manufacturing and services, with overall new orders rising at the weakest pace since November 2023. The slowdown was primarily domestic, as international demand for Indian goods and services improved to a seven-month high. 

Inflation pressures remain elevated 

Cost pressures across the private sector remained higher, reaching their highest level in nearly four years. While services firms increased selling prices more aggressively, manufacturers reported the weakest price rise in two years. Overall inflation at the composite level remained broadly stable compared to February.