Page 41 - CII-ARTHA

MARCH 2026

Services: Steady But Facing New
Figure 3: Services Sector-
Headwinds Revenue & Expenditure Growth (y-o-y%)

The services sector held relatively steady, with net sales
growth of 7.7 per cent in Q3FY26, marginally softer than 10.0
8.0 per cent in Q2FY26. Health and education remained 9.0 9.1
the fastest-growing segment at 13.1 per cent. IT services 8.0
grew at 8.7 per cent, indicating stable performance. 8.0 7.9 7.4 7.7
However, the sector continues to face pressure from
rising AI adoption and uncertain global tech spending. 7.0 6.8

6.0
Expenditure growth in services rose to 9.1 per cent,
outpacing revenue growth of 7.7 per cent, reducing 5.0
margins. The primary driver was raw material costs rising
to 10.7 per cent, while wage expenses ticked up to 6.6 per 4.0
cent reflecting sustained hiring demand. In services Q3FY25 Q2FY26 Q3FY26
sector, raw material costs rose to 10.7 per cent versus 8.3
per cent in Q2FY26, while interest expenses moderated Expenditure Growth Revenue Growth
sharply from 13.8 per cent to 2.2 per cent, providing
partial offset. Source: CMIE Prowess, CII research

Net Sales Growth (y-o-y%) PAT Margin (%)
Number
Sector
of firms Q2 FY26 Q3 FY26 Q2 FY26 Q3 FY26

Automotive 121 13.7 21.7 ▲ 9.4 9.4 -
Capital Goods 191 12.9 7.2 ▼ 10.8 9.3 ▼
Chemicals & 341 7.6 -3.4 ▼ 11.8 10.1 ▼
Chemical Products
Construction ▼ ▲
Materials 63 12.8 6.8 6.3 6.7
Consumer 78 15.3 23.1 ▲ 5.4 6.2 ▲
Manufacturing Durables

FMCG 209 9.4 2 ▼ 10.1 10.8 ▲
Manufacturing- ▼ ▲
Others 73 9.9 0.1 4.2 4.6

Metal & Metal 179 -0.8 6.8 ▲ 8.1 8.3 ▲
Products
Plastic & Rubber 111 6.2 2.1 ▼ 7.1 6.2 ▼

Textiles 194 4.7 -1.2 ▼ 4.9 2.5 ▼
Health & Education 44 13.5 13.1 ▼ 15.5 14.2 ▼

Hotels & Tourism 61 8.9 8.6 ▼ 9 15.2 ▲
Services
IT / ITeS 149 6.8 8.7 ▲ 21.5 19.6 ▼
Services- Others 200 14.7 11.8 ▼ 9.9 11.6 ▲

Transport 49 6.3 5.9 ▼ -3.5 8.9 ▲
Construction Construction & 165 2.1 0.2 ▼ 4.8 7.4 ▲
estate Real

Note: ▲ = improvement over previous quarter; ▼ = deterioration over previous quarter. All figures are in per cent
Source: CMIE Prowess, CII analysis

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