Growth in India’s services sector activity picked up mildly in August as output and employment generation rose, according to a private survey released on Thursday.
The HSBC India Services Purchasing Managers’ Index (PMI) rose to 54.1 in August from 53.3 in July. However, the reading was lower than the long-run series average of 54.5 and was the second-weakest since March 2022.
“Subdued bookings, strong competition and reduced transport operations limited growth, panel member reports showed,” the survey said.
The reading for August remained above the 50 mark, which indicates expansion in activity, while a reading below 50 signifies contraction. The headline figure has remained in the expansion zone for the 61st consecutive month.
The recovery in the services sector contrasted with the manufacturing sector, where the PMI fell to a five-year low of 52.8 in August.
The HSBC India Composite PMI Output Index, a weighted average of the Manufacturing Output Index and the Services Business Activity Index, was flat at 54.3, unchanged from the previous month as the dip in manufacturing was offset by the mild recovery in services.
New business intake at Indian service providers increased, but at one of the slowest rates in nearly four-and-a-half years, with firms citing challenging market conditions and weaker client interest in selected services, the survey said.
“India’s services activity expanded faster in August. Growth was supported by stronger output and new business, although the overall pace was still among the weakest seen in over four years, with some firms citing subdued bookings, competition and reduced transport operations,” said Pranjul Bhandari, chief India economist at HSBC.
International sales also increased, but the rate of growth in export sales was below the average seen over the past year.
Employment picked up as the rate of job creation rose to a 15-month high.
“Around 11 per cent of survey members reported higher staffing levels, which they linked to efforts to support customer service, sales and digital operations,” S&P said.
Job creation in the services sector offset the decline in manufacturing employment, which contracted for the first time in two-and-a-half years.
“Aggregate employment increased at the fastest pace in 14 months, as job shedding at manufacturers was more than offset by robust growth among services firms,” the survey said.
Input cost inflation for service providers moved up moderately in August as companies reported higher spending on digital platforms, electricity, inputs, labour, marketing and regulatory requirements.
Meanwhile, prices charged for services rose at the fastest pace since March as firms continued to pass on higher operating costs to clients, the survey said.
“Employment increased at a marked rate, with job creation reaching a 15-month high. Price pressures picked up only modestly: input cost inflation edged up slightly, while prices charged rose at the fastest rate since March as firms passed on higher operating costs,” Bhandari added.
