India’s services activity slips to 58.5 in March

Services PMI for March

India’s services sector ended the fiscal slightly lower, with the service activity index declining to 58.5 in March from 59 in the previous month, as a slowdown in external activity weighed on demand for Indian services.

"India recorded a 58.5 services PMI in March 2025, softening slightly from the month prior. Domestic and international demand remained fairly buoyant, despite being sequentially a tick lower than the month before," said Pranjul Bhandari, chief India economist, HSBC.

While domestic sales were supported by increases in new business, the growth was slower than the previous month. India's service sector performance has been muted in the fourth quarter of the fiscal.

The HSBC India Services Purchasing Managers' Index, compiled by S&P Global, slipped to over a two-year low in the January-March quarter at 58. The reading came in at 58.7 in the previous quarter.

Manufacturing sector, on the other hand, had a better showing, closing the year at an eight-month high of 58.1, with firms also more optimistic about the future.

The services sector’s performance was one of the primary causes for rebound in economic activity in the third quarter. The sector is expected to have grown 7.3 percent in FY25, down from 9 percent in the previous year.

However, future prospects seem bleak, as service providers noted that rising competition is expected to weigh heavy on business outlook.

"Heightened competition not only restricted price pressures, but it was also identified by panellists as the main challenge to output prospects. The level of positive sentiment slipped to a seven-month low and was below its long-run average," HSBC noted.

In what could be good news for the economy, consumer industries were the most upbeat about the future followed by finance and insurance and real estate.

Rising competition also eroded companies' pricing power as output inflation rose at the weakest pace in nearly three years. India's consumer inflation is likely to remain closer to RBI mid-point of 4 percent in the coming quarters.