India's service sector shows highest growth in over a decade
Despite a slight dip in April, India's service sector continues to exhibit robust growth, driven by strong demand. The HSBC Services Purchasing Managers' Index (PMI) fell from 61.2 in March to 60.8 in April, though still representing one of the fastest growth rates witnessed in 14 years. "India's service activity rose at a slightly softer pace in April, backed by a further rise in new orders, with notable strength in domestic demand," stated Pranjul Bhandari, chief India economist at HSBC.
Consistent growth in service sector since August 2021
From August 2021, the service sector in India has consistently remained above the PMI threshold of 50, indicating growth rather than contraction. However, a slight moderation was observed in India's manufacturing sector with the PMI falling to 58.8 in April. This resulted in a minor decrease in the overall Composite PMI reading for India to 61.5 from March's eight-month high of 61.8, still marking one of the highest readings seen in nearly 14 years.
New business sub-index hits three-month high
Favorable market conditions and strong demand have led the new business sub-index to reach its highest level in three months, marking the third-highest level in around 14 years. Sectors such as finance and insurance have seen significant growth. Service companies reported the second-fastest increase in new export business in nearly 10 years, with gains seen across Asia, Africa, Europe, Americas, and the Middle East. "Although new export orders remained robust, they showed a slight moderation from March," Bhandari noted.
Rising costs and staffing levels in the service sector
Survey participants highlighted increased food prices and wage pressures as cost burdens that were passed on to their customers, with the Consumer Services segment experiencing the sharpest increase in input costs. In reirms expanded their staffing levels, albeit at a slower pace than before. "Input costs continued to rise sharply, albeit slower than in March, but resulted in squeezed margins for service firms as only part of the price rise was passed on to clients through output charges," Bhandari explained.
