India's services sector soars in October, hiring at 2-year high
India's services sector has shown remarkable growth in October, after a minor slowdown in September. The HSBC India Services Purchasing Managers's Index (PMI) rose to 58.5 in October from 57.7 last month. This is the index's 39th consecutive month above the growth threshold of 50, reflecting continued momentum in a sector that contributes about 55% to India's GDP.
Consumer demand and job creation fuel services sector growth
The revival in the services sector is mainly due to an increase in consumer demand, especially in the domestic market. This has resulted in an increase in business activity and a sharp upturn in hiring, marking the fastest pace of job creation in over two years. HSBC's Chief India Economist, Pranjul Bhandari, said, "In October, the Indian services sector experienced strong expansions in output and consumer demand, as well as job creation."
New orders and exports boost business activity
Notably, the increased demand isn't just restricted to the domestic market but also international ones. Businesses reported a sharp increase in new orders, with exports to Africa, Asia, the Americas, the Middle East, and Britain contributing significantly. The surge in demand led to a sharp increase in the new business sub-index of the PMI, reflecting the resilience among India's service providers.
Inflationary pressures and RBI's response
The economic upswing has also resulted in some inflationary pressure. Service providers have responded by raising prices to offset higher input costs for essentials such as food, labor, and transportation. This trend could potentially impact consumer spending and may even prompt the Reserve Bank of India (RBI) to keep interest rates higher to mitigate inflation risks.
Manufacturing sector mirrors services sector's growth
In line with the services sector's growth, India's manufacturing sector also remained strong in October. The HSBC India Manufacturing PMI climbed to 57.5 from September's 57.1, indicating a positive trend. The strong performance across both sectors pushed the Composite PMI to 59.1 in October, up from 58.3 in September, signaling continued resilience in India's economy amid rising costs and global uncertainties.
