new-business-and-output-surge-driving-india-s-service-sector-to-near-14-year-high-hsbc-report

India's services sector experienced a slight easing in growth during April but still maintained robust expansion, driven by strong demand and favourable economic conditions, according to a monthly survey released on Monday.

 

The seasonally adjusted HSBC India Services Business Activity Index dipped from 61.2 in March to 60.8 in April, showcasing one of the strongest growth rates observed in nearly 14 years.

 

Survey respondents credited the upturn in output to favourable economic conditions, robust demand, and an increased intake of new work.

In purchasing managers' index (PMI) terms, a figure above 50 indicates expansion, while a score below 50 indicates contraction.

 

"India’s service activity increased at a slightly slower pace in April, driven by a further rise in new orders, particularly from domestic demand," commented Pranjul Bhandari, Chief India Economist at HSBC.

 

Alongside buoyant domestic demand, companies reported gaining new business from various parts of the world, contributing to the second-quickest upturn in international sales since September 2014.

 

Despite increased new orders, job creation in the service sector remained modest, with some firms indicating that current staffing levels were adequate for their needs.

 

Responding to the rise in new orders, firms expanded their staff levels, although the pace of hiring growth decelerated, Bhandari noted.

 

On the pricing front, wage pressures and higher food prices led to a rise in cost burdens, which were partially passed on to customers. However, firms faced squeezed margins as only a portion of the price increase was transferred to clients through output charges.

 

Confidence among service providers regarding the year-ahead outlook for business activity improved to a three-month high, driven by marketing efforts, efficiency gains, competitive pricing strategies, and optimistic predictions about favourable demand conditions.

 

Meanwhile, the HSBC India Composite PMI Output Index slightly moderated to 61.5 in April from 61.8 in March, yet still indicated significant expansion across the private sector.

 

Aggregate output across both manufacturing and service sectors rose notably in April, albeit at a slightly slower pace, signalling sustained health in these sectors.

 

Manufacturers continued to report a stronger increase in new business intakes compared to service providers, with aggregate sales rising sharply at one of the fastest rates since mid-2010.

 

Composite PMI indices provide weighted averages of comparable manufacturing and service PMI indices, reflecting the relative size of the manufacturing and service sectors according to official GDP data.