The services sector in India logged sharp growth as it climbed to a three-month high in December, helped by favourable economic conditions and optimistic demand trends, a survey revealed.
The seasonally adjusted HSBC India Services PMI Business Activity index climbed from 56.9 in November to 59 in December, showcasing a robust increase in output, reported PTI. Notably, a reading above 50 in the Purchasing Managers’ Index (PMI) indicates expansion, while a figure below 50 denotes contraction.
The monthly survey is prepared after putting together responses to questionnaires sent to a panel of nearly 400 service sector firms. Pranjul Bhandari, chief India economist, HSBC, commented on the survey findings and said, “India’s services sector ended the year on a high note, with an uptick in business activity, led by a three-month high new orders index.”
The survey further found that the growth in overall new business was supported by consistent expansion in international sales. Service providers also observed increased demand from clients located in Australia, Canada, Europe, the Middle East, and South America during the reviewing month. Deman buoyancy pushed sales, in turn providing a boost to business activity. It noted that job generation also increased for the 19th consecutive month, and at the same time, business optimism strengthened.
Regarding the outlook, the report stated that the services firms in India anticipate a robust demand momentum to continue in 2024, backed by advertising and improved customer relationships.
On the prices end, the survey observed that cost pressures reduced further, touching their lowest in almost three and a half years. However, there was a quicker and solid upturn in selling charges. Input costs grew at a dampened pace than a month earlier, continuing the softening trend that started in mid-2023. However, Bhandari noted, ‘Output prices rose at a faster pace, indicating improved corporate margins in December’.
The HSBC India Composite PMI Output Index rose from 57.4 in November to 58.5 in December, indicating a sharp pace of growth that was the strongest since September. Notably, composite PMI indices represent a weighted average of comparable manufacturing and services PMI indices. The weights indicate the relative size of the manufacturing and service sectors, on the basis of official GDP data.
As per the survey, the growth in December’s Composite PMI was underpinned by a swifter rise in the service economy, as factory production increased at the slowest pace in 14 months. Goods producers observed a weaker upturn in new orders, while service providers saw an acceleration. At the composite levels, sales grew at the fastest pace since September.