Service sector activity moderates in March

Indian service sector growth as measured by the HSBC Purchasing Managers' Index moderated in March on the back of rising input costs. The PMI, which is calculated on a seasonally adjusted basis, fell to 53.0 in March from 53.9 in February.

PMI, compiled monthly by global bank HSBC, measures economic health of a sector based on surveys of private sector companies. A reading of above 50 on the index denotes expansion.

According to the report, activity rose in four of the six broad areas of the service economy, the exceptions being financial intermediation and hotels and restaurants. The level of new business placed with Indian service companies increased in March, as per the report. 

“India’s service sector ended the first three months of 2015 with a strong performance, providing signals that much of the weakness seen in 2014 has been left behind," said Pollyanna De Lima, economist at Markit.  

While the manufacturing sector saw a stabilisation in staffing levels, employment in the service sector rose during March. This was an improvement from the broadly unchanged levels recorded in the prior month. 

The report released last week showed manufacturing sector in India robustly expanding to 52.1 as all three sectors recorded growth. Though the composite PMI index fell to 53.2, it recorded 11th straight month of increase in private sector output.  

"Despite softening slightly since the prior month, growth of activity and new business in the country’s dominant sector was robust. These figures, taken in conjunction with manufacturing, marked a good quarter for businesses," Lima said.

With the Indian businesses expanding at a good pace, the focus is on RBI monetary policy meeting on April 7. A survey of economists by VCCircle showed that while the bank is expected to hold rates in the current meeting, markets are pricing a rate cut by June.

(Edited by Joby Puthuparampil Johnson)

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