India’s services sector continued to expand in March 2026, but the pace of growth has slowed to its weakest level in over a year, even as demand and exports remain resilient, according to the latest HSBC India Services PMI data.
What is India services PMI and why it matters
The HSBC India Services PMI Business Activity Index fell to 57.5 in March from 58.1 in February. While the index remains well above the 50 mark that separates expansion from contraction, it signals that growth momentum is easing.
This marks the slowest expansion in 14 months, indicating that while the sector is still growing, it is doing so at a reduced pace compared to recent months.
Why is India’s services growth slowing
The moderation in growth is largely linked to softer domestic demand and global uncertainties. Businesses reported that new orders grew at the slowest pace since January 2025, reflecting a cooling in overall activity.
A key factor impacting sentiment has been the ongoing Middle East conflict, which has affected demand, tourism, and broader market conditions. This has led to a visible slowdown across segments such as finance, real estate, and communication services.
Why exports are still supporting growth
Despite the slowdown in domestic demand, international business continues to provide a strong cushion. Export orders rose sharply, recording one of the strongest increases since data tracking began in 2014.
Demand from regions including Asia, Europe, the Americas, and the Middle East has helped sustain overall activity levels.
Why cost pressures are rising sharply
One of the biggest concerns highlighted in the report is the surge in input costs. Inflation in input prices has reached its highest level in nearly four years, driven by rising costs of fuel, transport, food items, and labour.
Businesses have started passing some of these costs on to customers, pushing selling price inflation to a seven month high.
What the broader economy signals
The composite PMI, which includes both manufacturing and services, also declined to 57.0 from 58.9, marking the weakest expansion in nearly three and a half years.
At the same time, employment has continued to grow, and business confidence has improved, indicating that companies remain optimistic about future demand despite near term challenges.
What this means going forward
India’s services sector remains in expansion territory, supported by strong export demand and improving business sentiment. However, rising costs and slowing domestic demand are emerging as key risks that could shape growth trends in the coming months.
The balance between inflation pressures and demand recovery will be crucial in determining whether growth stabilises or slows further.