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India’s services sector growth moderated in March after hitting a 12-year high in February, as new business orders increased at a softer rate, a monthly survey said on Wednesday.

The seasonally adjusted S&P Global India Services PMI Business Activity Index eased from 59.4 in February to 57.8 in March, indicating a slower rate of expansion.

For the 20th straight month, the headline figure was above the neutral 50 threshold. In Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction.

“India’s service sector built on to the momentum gained in February with further increases in new business intakes and output at the end of the 2022/23 fiscal quarter. However, manufacturing has retaken the mantle as the main driver of growth,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

Similar to output, new business inflows increased at a softer but still sharp rate in March.

On the jobs front, the survey panelists commonly cited adequate capacities for current requirements, a factor that curbed job creation.

“Despite rising for the 10th month in a row, services employment grew only factionally in March. Close to 98% of survey participants left payroll numbers unchanged amid sufficient staff levels for current requirements,” the survey said.

Going ahead, the overall level of positive sentiment fell to an eight-month low as several firms foresee no change in activity from present levels.

Meanwhile, the S&P Global India Composite PMI Output Index–which measures combined services and manufacturing output–fell from 59.0 in February to 58.4 in March.

Private sector sales rose for the 12th consecutive month in March, amid sustained increases at goods producers and service providers. “The overall pace of expansion was sharp, despite easing from February,” the survey said.

On the prices front, a sizeable proportion of services firms hiked their selling prices to hedge against rising costs, emboldened by favourable demand conditions.

“The rate of charge inflation was moderate but quickened since February, a trend that was matched by manufacturing,” Lima said.

The RBI’s rate-setting panel on Monday started its three-day meeting amid expectations that the central bank may go for a 25 basis point hike in benchmark interest rate, probably the last in the current monetary tightening cycle that began in May 2022.

Reserve Bank Governor Shaktikanta Das-headed Monetary Policy Committee during its three-day meeting (April 3, 5, and 6) will take into account various domestic and global factors before coming out with the first bi-monthly monetary policy for fiscal 2023-24.

The S&P Global India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. Data collection began in December 2005.