India’s services PMI hits 13-year high in April

Job creation remains negligible, inflation jumps

India’s services sector, which makes up around 60 per cent of the country’s GDP, posted its fastest expansion in nearly 13 years in April led by robust jump in new businesses and output, an industry survey conducted by S&P Global showed.

Purchasing Managers’ Index (PMI) for services surged to 62 in April from 57.8 in the previous month, the best performance since 2010.

While the companies became more optimistic towards future business activity, job creation remained negligible, the report showed.

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S&P Global India Services PMI is a survey-based indicator based on the responses of around 400 service firms from across sectors including finance, insurance, real estate, transport, communication and business services.

“India's service sector posted a remarkable performance in April, with demand strength backing the strongest increases in new business and output in just under 13 years,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

Finance and insurance was the brightest spot, topping the sectoral growth rankings. Mirroring the trend for business activity, new orders rose at the fastest pace since June 2010. Growth was linked by survey members to strong demand for services and competitive pricing.

Despite the substantial uptick in new orders, very few new jobs were created during the month. Some companies lifted headcounts due to rising output needs. However, the vast majority left them unchanged amid sufficient workers for current requirements, the survey showed.

"One area of weakness highlighted in the latest results was the labour market. Despite the substantial pick-up in sales growth and improved business sentiment towards the outlook, the increase in employment seen in April was negligible and failed to gain meaningful traction,” De Lima said.

The survey indicates rising inflationary pressure with input costs and output charges rising at faster rates that outpaced their respective long-run averages.

Input costs rose at the quickest pace in three months during April, and one that outpaced the long-run series trend. Food, fuel, medicine, transportation and wages were the main sources of inflation. Consumer services recorded the fastest upturn in average expenses.

Accommodative demand conditions facilitated the pass-through of additional expenses to clients, with prices charged for the provision of services increasing at the strongest rate in 2023 so far, the report said.

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Business confidence remained positive. Close to 22 per cent of companies forecast growth of business activity over the course of the coming 12 months, compared with 2 per cent that anticipate a reduction.

The latest PMI data indicates robust expansion in both services and the manufacturing sector. Manufacturing PMI rose to 57.2 in April from 56.4 in the previous month, the best performance in the calendar year 2023, as per data released by S&P Global on Monday.

The PMI print above 50 indicates growth in the sector while below 50 shows contraction. Services PMI has posted expansion for 21 months in a row, the longest stretch of expansion since August 2011.