India Services Growth Slows to 14-Month Low

The HSBC India Services PMI was revised higher to 57.5 in March 2026 from 57.2 in the preliminary estimate and above expectations of 57.4, signaling a slower yet still solid expansion in the services sector. However, the latest reading marked the weakest growth since January 2025 and was below February’s 58.1, although demand remained resilient, led by new export orders, which rose at the fastest pace since mid-2024. While new business gains continued to drive growth, output was constrained by the impact of the Middle East war on demand and tourism. Employment increased, with job creation rising at the fastest pace since mid-2025. On prices, input price inflation accelerated to near its highest level in almost four years, driven by higher costs for chicken, cooking oil, eggs, electricity, fish, fruits, fuel, labor, meat, and vegetables. As a result, output price inflation rose to its highest level in seven months. Lastly, sentiment strengthened, alongside continued gains in employment.

The HSBC India Services PMI fell to 57.2 in March 2026 from 58.1 in February, signaling a slower yet still solid expansion in the services sector. The latest reading marked the weakest growth since January 2025, weighed by softer domestic demand despite resilient external conditions. New business growth eased to a three-year low, though export orders hit a series high, supported by broad-based international demand. However, geopolitical tensions in the Middle East, market volatility, and inflationary pressures, weighed on activity and disrupted segments such as international travel. On prices, input costs rose at the fastest pace in nearly four years, with firms passing on only part of the increase. Despite softer demand, hiring continued to expand, with employment rising at the fastest rate since August 2025. Looking ahead, sentiment remained positive, underpinned by expectations of improved efficiency, stronger marketing efforts, and new client gains, even as cost pressures persist.

The HSBC India Services PMI was revised slightly down to 58.1 in February 2026 from an initial estimate of 58.4. This was below January’s reading of 58.5 and forecasts of 58.6, yet still signaled another month of robust expansion in the sector. While new order growth slowed to a 13-month low due rising competition, international sales rose at the fastest pace since last August. This led firms to increase hiring, with the rate of job creation surpassing its long-term trend. Meanwhile, services companies faced mild operating capacity pressures, reflected in a second monthly rise in backlogs. Cost pressures also intensified, with input inflation accelerating to a two-and-a-half-year high, driven by higher food prices and increased spending on energy, labour, and commodities. Output price inflation also rose to a six-month high. Nonetheless, business confidence climbed to its highest level in a year as companies sought to expand their presence in both existing and new markets.