India's service sector booms in June, record exports fuel growth
India's service sector activity experienced a surge in June, reaching 60.5 from May's five-month low of 60.2, according to HSBC India Services Business Activity Index. The key index has consistently stayed above the 60-mark since the beginning of 2024. "Activity growth in India's service sector accelerated in June, with the index rising by 0.3ppt to 60.5, led by an increase in both domestic and international orders," stated Pranjul Bhandari, chief India economist at HSBC.
Employment generation hits two-year high
The survey also disclosed that improved demand conditions led firms to ramp up hiring, with job creation reaching its fastest pace in nearly two years. The report underscored a blend of short-term and permanent hires across junior, medium, and senior-level positions. However, this surge in labor additions resulted in an increased cost burden for companies. Despite this, input inflation eased to a four-month low.
Service providers' optimism dips amid market uncertainty
Interestingly, only 5% of service firms transferred the costs to their clients, resulting in a moderate rate of charge inflation. "Overall, service providers remain confident about the year-ahead business outlook, although the level of optimism moderated sharply during the month," Bhandari observed. This sentiment dropped to an 11-month low due to concerns surrounding market uncertainty and competition.
Services exports expected to rise, boosting economy
The survey, which included responses from 400 services firms, reported a further increase in export orders from Asia, Australia, Europe, Latin America, the Middle East and the US. Services exports rose nearly 5% in FY24 to $341.1 billion and are anticipated to climb further this year. The government is aiming for a level of $1 trillion by 2030. IMF chief economist Pierre-Olivier Gourinchas said on Tuesday that India's services exports will likely cushion the economy in an increasingly fragmented world.
