India's services sector expanded in March, although the sector's Purchasing Managers' Index (PMI) dropped to 57.8 from the 12-year high of 59.4 in February, according to a private survey by S&P Global. This comes days after India's manufacturing PMI in March rose to a three-month high of 56.4.
This reduced the composite PMI, a combination of the manufacturing and services indices, to 58.4 in March from the earlier 59.0 in February.
The services PMI in March is above the key level of 50 which basically separates expansion in activity from a contraction for 20 months in a row.
S&P Global in a statement said, "Despite falling from 59.4 in February and thereby indicating a slower rate of expansion, the latest figure was consistent with a substantial upstick in output."
Rise in overall new business
According to S&P Global, the rise in overall new business was supported by an increase in international sales. The impact of robust foreign demand for India' services that include the record service exported can be clearly seen in the PMI data.
Employment situation
However, despite the robust PMI number, the employment situation in March continues to be the same. This clearly diminishes the idea that growth prospects were one of the limitations in the hiring process. Pollyanna De Lima, economic associate director at S&P Global Market Intelligence, said, "Weakness was seen with regards to jobs, with broadly no change in employment seen neither in services nor in manufacturing as a general lack of pressure on operating capacities and diminished confidence towards growth prospects prevented hiring activity."
De Lima also added that firms in both sectors don't expect a change in the future output from the current levels.
Increase in input prices
Despite the rate of inflation being the lowest in two and a half years, service providers have seen a further increase in input prices. Service firms, in contrast, continue to pass the higher costs to consumers, pushing the selling price to a three-month high in March.
Despite increasing output and optimistic response from service providers the overall level of positive sentiment saw a dip to an eight-month low as the firms don't see any change in activity.
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