Services PMI ends FY24 strongly with 61.2 in March

Strong demand pushed the Services’ Purchasing Managers Index (PMI) to 61.2 in March, S&P Global reported on Thursday. It is one of the strongest growth rates in over 13-and-a-half years in March. February index was 60.6.

Earlier, the agency said that manufacturing PMI in March was 59.1, which is highest in 16 years. Performance of these two sectors showed strong economic activities. The latest Index also indicates that growth during the January-March quarter would be better.

“India Services Business Activity Index pointed to one of the strongest growth rates seen in over 13-and-a-half years. The upturn was largely attributed to healthy demand conditions, efficiency gains and positive sales developments.” S&P Global said in its report accompanying PMI.

PMI is derived from responses from purchasing executives of 400 companies. the index above 50 means expansion, while below 50 indicates contraction.

Ines Lam, Economist at HSBC, said that India’s services PMI rose in March, following a small dip in February, on the back of strong demand that spurred sales and business activity. “Service providers increased hiring at the fastest pace since August 2023 in order to expand production capacity,” she said.

While buoyant domestic demand and favourable economic conditions drove up new business, exports jumped at the quickest pace since the sub-index was included in the survey in September 2014. That encouraged firms to increase hiring at the fastest rate since August. That is good news for a country with millions of entrants to the workforce every year.

The outlook for the coming year remained optimistic, although last month’s reading showed the future activity sub-index had slipped to a four-month low as there were some concerns surrounding competitive pressures. Rising input costs coupled with robust demand led firms to pass on the increase to clients, resulting in prices charged climbing at the strongest rate since July 2017.

“Input costs rose at a faster rate, yet service providers were able to broadly maintain margins by charging higher output prices,” added Lam. The survey further noted that there has been an intensification of price pressures, with both input costs and output charges increasing at faster rates.

Going ahead, services companies expect demand trends to remain favourable, with marketing efforts also seen as a growth opportunity. There were, however, some concerns surrounding competitive pressures, the survey said.

Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors, according to official GDP data. March data pointed to a sharp increase in aggregate output across India, as both goods producers and service providers noted a pick-up in growth.

Meanwhile, the HSBC India Composite PMI Output Index rose from 60.6 in February to 61.8 in March, highlighting the second-strongest upturn in over 13-and-a-half years.

COMMENT NOW