A sharp increase in domestic demand conditions marked by new orders and output has spelt unprecedented growth for India’s services sector, which showed a 15-year-high in August, according to a monthly survey.
The seasonally adjusted HSBC India Services PMI Business Activity Index showed the services sector growth figure up from 60.5 in July to 62.9 in August, indicating the steepest rate of expansion since June 2010.
In the Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.
Not only was there substantial improvement in demand during the month of August, which pushed growth of new orders and activity to their highest rates in over 15 years, there was also a rise in international sales, which, in fact, was the third-strongest since the series started in September 2014.
"India's services PMI Business Activity Index reached a fifteen-year high last month, from 60.5 in July to 62.9 in August, on the back of surging new orders," commented Pranjul Bhandari, Chief India Economist at HSBC.
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Crediting a broad-based expansion in international sales, Bhandari said demand from clients in Asia, Europe, the Middle East, and the US prompted Indian service firms to hire additional workers, which also reflected in higher labour costs and robust demand conditions.
“Both input and output prices increased substantially in August," he added.
Meanwhile, August data highlighted a broad-based pick-up in growth of output across India's manufacturing and service sectors. Subsequently, the HSBC India Composite PMI Output Index rose from 61.1 in July to 63.2 in August, indicating the sharpest pace of expansion in over 17 years.
On the price front however, the rate of inflation quickened to a nine-month high while demand buoyancy facilitated the steepest increase in output charges since July 2012.
Meanwhile, year-ahead expectations improved to a joint five-month high in August (equal to May). Some companies also hope to be able to take on more work as a result of staff recruitment in recent months.
Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. The weights reflect the relative size of the manufacturing and service sectors according to official GDP data.
The HSBC India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.
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