Services Sector Optimistic on Q3FY27 Demand, but Firms Cautious on Costs and Margins: RBI

New Delhi, Oct 12 (KNN) India's services sector is expected to maintain a positive demand outlook in Q3FY27, although business optimism has moderated from the previous quarter, with firms anticipating some easing in cost pressures but remaining cautious about selling prices and profit margins, according to the Reserve Bank of India's (RBI) latest Services and Infrastructure Outlook Survey.

The survey found that services companies reported improvements in overall business conditions, turnover and full-time employment during Q2FY27. However, firms also faced higher input cost pressures and reported some increase in selling prices, while sentiment on profit margins remained subdued, ANI reported.

Looking ahead, services firms remained optimistic about demand in Q3FY27, although confidence levels were lower than in the preceding quarter. Respondents expected cost pressures to ease moderately but expressed relatively less optimism about selling prices and profit margins.

For Q4FY27 and Q1FY28, the outlook remained positive, with firms expecting input cost pressures to persist and selling prices to remain stable.

The RBI survey also indicated that services companies had the capacity to deliver 8.7 per cent more services during Q1FY27 using their existing resources.

Infrastructure Firms Remain Optimistic

Infrastructure companies reported positive sentiment on overall business conditions, employment and turnover during Q2FY27, while input cost pressures showed some moderation. However, sentiment regarding selling prices and profit margins weakened.

For Q3FY27, infrastructure firms remained confident about overall business conditions and turnover, although their expectations for selling prices and profit margins moderated.

The outlook for Q4FY27 and Q1FY28 remained optimistic, with companies expecting higher input costs to be accompanied by an increase in selling prices.

The survey indicated that infrastructure firms continued to expect growth in business activity and turnover over the coming quarters, despite cost-related pressures.

(KNN Bureau)