Services Sector Activities Ease In March On Covid Woes

The seasonally-adjusted India Services Business Activity Index fell from 55.3 in February to 54.6 in March

Services Sector Activities Ease In March On Covid Woes
Services Sector Activities Ease In March On COVID Woes
PTI - 07 April 2021

India's services sector activities eased in March as growth was hit by the detrimental impact of the coronavirus pandemic and input costs remained elevated, a monthly survey said on Wednesday.

The seasonally-adjusted India Services Business Activity Index fell from 55.3 in February to 54.6 in March. Though the rates of expansion softened, it indicated growth for the sixth consecutive month.

In PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction.

"The elections supported the uptick in demand but the Covid-19 pandemic and reduced footfall restricted the upturn," Pollyanna De Lima, Economics Associate Director at IHS Markit, said.

Further, Lima cautioned that "the escalation of the pandemic and the reinstatement of restrictions could cause a notable slowdown in growth during April".

External demand for Indian services continued to worsen, with new orders from abroad decreasing for the thirteenth straight month, the survey said.

On the prices front, the survey participants reported a sharp increase in input costs, the second-fastest since February 2013. Selling prices rose only fractionally as the vast majority of companies left their fees unchanged due to competitive pressures.

With respect to employment, services companies posted another decline in payroll numbers during March.

Looking ahead, the survey said companies expect business activity to increase over the course of the coming 12 months.

"Service providers hope for an improvement in vaccine availability, which would curb the spread of the disease and support the economy. Optimism towards the year-ahead outlook for business activity was sustained but the overall level of confidence was unchanged from February and remained below its long-run average," Lima said.

Meanwhile, the growth of Indian private sector output eased in March. The Composite PMI Output Index, which measures combined services and manufacturing output, was at 56 in March down from 57.3 in February.

Transport and Storage were the key sources of strength during March, with the sector recording sharp and accelerated increases in sales and business activity.

Consumer Services and Finance and Insurance remained in an expansion mode while contractions were evident in Information and Communication and Real Estate and Business Services, Lima noted.

On Wednesday, the Reserve Bank of India (RBI) kept the key policy repo rate unchanged at 4 per cent but warned that the recent surge in Covid-19 infections has created uncertainty over economic growth recovery.