Services sector growth slows in March after 12-year high in Feb
India’s services sector has witnessed a strong rebound driven by pent-up demand for contact intensive activities such as tourism, retail trade, hotel, entertainment and recreation which took the biggest hit from the pandemic.
PremiumNew Delhi: The service sector continued to grow at a healthy pace but softened slightly in March compared with the previous month, a private survey showed on Wednesday.
The S&P Global India Services Purchasing Managers‘ Index stayed above the 50-mark for the 20th consecutive month even as it slipped to 57.8 last month from a 12-year high of 59.4 in February. The 50-mark separates growth from contraction.
India’s services sector has witnessed a strong rebound driven by pent-up demand for contact intensive activities such as tourism, retail trade, hotel, entertainment and recreation which took the biggest hit from the pandemic.
However, despite rising for the tenth month in a row, services employment grew only fractionally in March. Close to 98% of survey participants left payroll numbers unchanged amid sufficient staff levels for current requirements, S&P said in the survey report.
“India’s service sector built on to the momentum gained in February with further increases in new business intakes and output...However, manufacturing has retaken the mantle as the main driver of growth," said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.
A sub-index tracking new business inflows in the services industry declined to 58.1 from 59.5 in February and firms hired at the slowest pace in 10 months, citing adequate capacity.
Future business expectations slipped to their lowest in eight months.
Mint had reported that macroeconomic headwinds could play a spoilsport for information technology (IT) services firms this quarter, leading to sharply lower revenue growth for most companies.
According to industry stakeholders, a slowdown in the banking and financial services sector in the US, and greater caution in discretionary tech spending globally, may lead to a drop of around 700 basis points in the revenue growth rate this financial year.
“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.
Lima added that a sizable proportion of services firms hiked their selling prices to hedge against rising costs, emboldened by favourable demand conditions. The rate of charge inflation was moderate but quickened since February, a trend that was matched by manufacturing,
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