The HSBC India Services Business Activity Index, or services PMI, stood at 60.9 on resilient demand amid easing inflationary pressures, data released by S&P Global showed. India’s services activity rose at a five-month high in August. The services PMI was up from 60.3 in July and the headline figure indicated the strongest rate of expansion since March and one that was well above its long-run average. According to panel members, growth was underpinned by productivity gains and positive demand trends. According to the survey, Indian service providers signaled that the strong start to the second fiscal quarter continued into August, with business activity expanding to the greatest extent since March as growth of incoming new business ticked higher. Moreover, it also stated that payroll numbers rose solidly as companies remained upbeat regarding the economic outlook. Another positive development included a slowdown in output charge inflation, which was helped by cost pressures retreating to their lowest in four years.
The Composite PMI for India continued to show strong growth in August, driven by accelerated business activity in the service sector, which experienced its fastest expansion since March. This growth was largely fuelled by an increase in new orders, particularly domestic orders. Employment levels remained robust, though there was a slight decrease in the pace of hiring compared to July. On a positive note, input costs rose at their slowest pace in six months, with both the manufacturing and service sectors exhibiting the same pattern. Consequently, output price inflation receded in August. However, the outlook for the Indian private sector over the next year has moderated, reaching its lowest level in 15 months due to competitive pressure, although the Future Output Index remained above the long-term average.
Order growth from international and domestic markets:
As per the findings of the survey, the current run of new order growth was also stretched to 37 months in August. The rate of increase quickened marginally from July and was the strongest since April. In terms of international order, S&P Global said, while the demand remained strong, the pace of growth in the segment slowed to a six-month low, reflecting softer global conditions. Despite this, the overall outlook remained positive, although business confidence slipped to its lowest level in over a year. The pick in total sales was centered on the domestic market as new export business increased at a slower pace in August. In terms of sector, Finance & Insurance were the best performing areas of India’s service economy regarding both output and new business.
Cost pressures:
According to the survey, cost pressures within the sector increased moderately in August and this was driven by greater food, labour and transportation costs. The overall rate of inflation was, however, modest and the weakest since August 2020. Fewer than 4% of monitored companies signaled an increase in their average selling prices relative to July, with the remaining firms reporting no change. Subsequently, the overall rate of charge inflation across India’s service economy was moderate. The rise was also slower than that seen in July. In terms of sectors, Consumer Services posted the sharpest increase in input costs during August. Charge inflation was led by Transport, Information and Communication.
