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New Delhi: India’s services sector growth accelerated to a five-month high in August on the back of resilient domestic demand and easing inflationary pressure, an industry survey conducted by S&P Global showed on Wednesday.
The Purchasing Managers’ Index (PMI) for services increased to 60.9 in August from 60.3 recorded in July. A PMI print above 50 indicates growth in the sector while below 50 shows contraction. The services PMI has been above 50-mark for 37 months in a row.
S&P Global noted in the report that August growth was “underpinned by productivity gains and positive demand trends.”
The current run of new order growth also stretched to 37 months in August. The rate of increase quickened marginally from July and was the strongest since April, as more than one-quarter of industry leaders who participated in the survey reported an improvement. The services PMI is based on a survey of around 400 services sector companies.
“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,” said Pranjul Bhandari, Chief India Economist at HSBC.
Though there was acceleration in domestic demand, growth in new export business slipped to a six-month low.
Sub-sector data showed Finance & Insurance as the best performing area of India's service economy regarding both output and new business. Another positive development included a slowdown in output charge inflation, which was helped by cost pressures retreating to their lowest in four years.
Service providers signalled a further increase in their operating expenses, amid greater food, labour and transportation costs. The overall rate of inflation was, however, modest and the weakest since August 2020.
“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,” said Bhandari.
Business confidence slipped to a 13-month low. Some firms were concerned about competitive pressures, the rating agency said in the monthly report. The proportion of service providers expecting an increase in output over the course of the coming 12 months slipped to 21% in August from 30% in July.
“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,” Bhandari said.