Services sector registers strongest growth in four months, boosted by rising demand and lower inflation

NEW DELHI: India’s services sector growth reached a four-month high in December, driven by a surge in new business inflows on strong demand conditions, and a reduction in inflationary pressures, according to a monthly survey released on Monday.
The seasonally adjusted HSBC India Services Business Activity Index rose to 59.3 in December, up from 58.4 in November, marking the strongest expansion since August.
In the Purchasing Managers’ Index (PMI) framework, a reading above 50 indicates growth, while below 50 signals contraction.
The survey highlighted strong demand conditions, with plenty of new business inflows driving higher output and prompting firms to hire more workers.
Ines Lam, economist at HSBC, said, “India’s services companies expressed strong optimism in December as business activity growth surged to a four-month high. Forward-looking indicators such as new business and future activity suggested that the strong performance will likely continue in the near future.”
While panellists reported increased costs for food, labour, and materials, the overall rise in input costs slowed, leading to a softer increase in selling prices. Lam noted that the easing of input price inflation supported positive business sentiment.
“Strength in the services PMI stands in contrast with the growing signs of a slowdown in the manufacturing industry,” Lam said, quoted by news agency PTI.
India’s manufacturing sector showed growth slowing to a 12-month low in December, with weaker expansions in new orders and production.

Employment and business outlook

Service providers remained optimistic about growth over the next 12 months, though overall sentiment dipped slightly from November’s six-month high. Rising capacity pressures, upbeat forecasts, and rising new business supported continued job creation, with employment growth remaining among the sharpest recorded since data collection began in December 2005.
“The rate of employment growth softened from November, but was sharp and among the strongest seen since data collection began in December 2005,” the survey reported.
The private sector also posted faster growth, the HSBC India Composite Output Index climbed to 59.2 in December, up from 58.6 in November.
Composite PMI indices are calculated as weighted averages of the manufacturing and services PMI indices, with the weights based on the relative size of the manufacturing and service sectors, as indicated by official GDP data.
Strong new business inflows in the services sector offset a slight slowdown in manufacturing, strengthening aggregate sales, according to the survey.
The HSBC India Services PMI, compiled by S&P Global, is based on responses from approximately 400 service sector companies.