India's services sector activity remains buoyant in March

Meanwhile, the HSBC India Composite PMI Output Index increased to a 7-month high of 59.5, from 58.8 in February, to record another month of above-trend growth.

The 50.0 mark in the HSBC PMI index represents the crucial level that separates growth from contraction.

“Domestic and international demand remained fairly buoyant in March, despite being sequentially a tick lower than the month before," said Pranjul Bhandari, chief India economist at HSBC.

"Looking ahead, business sentiment remains generally positive, but intensifying competition presents a significant challenge to many survey participants," Bhandari said.

At the sub-sector level, there was a broad-based increase in business activity and sales, with finance and insurance exhibiting the strongest growth trends, followed by consumer services. Underlying data indicated that the slowdown in the growth of total new business reflected a weaker increase in international sales.

New orders from abroad rose at the softest pace in 15 months. Fierce competition and fading cost pressures suppressed charge inflation in March. Output prices rose at the weakest rate in three-and-a-half years. Heightened competition not only restricted price pressures, but it was also identified by panellists as the main challenge to output prospects.

Hiring activity across the service economy was pared back in March. Employment still rose at an above-trend pace, albeit one that was the weakest in close to a year. Several companies suggested that they had sufficient capacity for current requirements. Outstanding business volumes among Indian service providers rose only slightly in March.

Domestic demand remained a key driver, with new business showing solid growth, although the pace moderated as compared to February.

Foreign demand softened, and international orders rose at the slowest pace in 15 months, signalling potential vulnerabilities to global economic shifts, including from US President Donald Trump's recently announced tariff measures.

Inflationary pressures subsided, with input cost inflation rising at its slowest pace in five months. That, along with intense competition, led to the weakest increase in output prices since September 2021, HSBC said.