India’s services sector remained in expansion territory in March 2026, though the pace of growth moderated, reflecting both domestic resilience and mounting external pressures, according to the latest Purchasing Managers’ Index compiled by S&P Global.
The index registered 57.5 in March, down from 58.1 in February, yet still comfortably above the 50 threshold that distinguishes expansion from contraction. This suggests that while activity continues to grow, the momentum has softened compared with earlier in the year. The data is drawn from a survey of around 400 firms conducted between 11 and 27 March and is widely used as a high frequency indicator of economic conditions.
Growth in new business continued to support output across the sector, though the report notes that geopolitical instability in the Middle East weighed on demand, particularly in tourism and related services. This reflects the interconnected nature of global service flows, including travel, logistics and financial services, which are sensitive to regional instability. For African economies with strong tourism linkages or service exports to Asia and the Gulf, such developments underscore shared vulnerabilities within the Global South.
Demand conditions were uneven across subsectors. Slower expansion was recorded in finance and insurance, real estate and business services, and transport, information and communication. This broad based moderation points to a cooling of domestic demand, even as overall activity remains robust.
In contrast, international demand showed notable strength. Indian service providers reported a near record increase in foreign sales, with growth observed across Africa, Asia, Australia, Europe, the Americas and the Middle East. According to S&P Global, only June 2024 recorded a faster pace of expansion in overseas demand since data collection began in September 2014. This pattern highlights the growing integration of emerging market service economies and signals opportunities for deeper South South cooperation, including between India and African markets in areas such as digital services, finance and business process outsourcing.
Cost pressures, however, intensified during the month. Firms reported that input prices rose faster than the prices they were able to charge clients, suggesting a compression of operating margins. This dynamic reflects broader global inflationary pressures affecting energy, labour and imported inputs, trends that are similarly being experienced across many African economies navigating currency volatility and supply chain constraints.
Despite these challenges, business sentiment remained notably strong. Firms expressed their highest level of optimism in nearly twelve years, supported by expectations of improved demand and stabilising market conditions. Such forward looking confidence indicates that firms anticipate current headwinds to be temporary rather than structural.
The composite PMI, which combines both manufacturing and services activity, declined to 57.0 in March from 58.9 in February, marking the slowest rate of expansion in approximately three and a half years. While still indicative of growth, the easing suggests that India’s broader economy is entering a more measured phase of expansion.
For Southern African observers, India’s services sector offers both a comparative benchmark and a potential partner in economic diversification. The expansion of cross border service trade, particularly with African regions cited in the report, points to evolving economic relationships that move beyond traditional commodity based exchanges. At the same time, shared exposure to geopolitical shocks and cost pressures highlights the importance of building resilient, regionally integrated service economies across the African continent.
Further details of the report can be accessed via S&P Global Market Intelligence and contextual economic indicators are available through the Reserve Bank of India.
