New Delhi: India’s service sector continued its brisk pace in November at 58.4 points, after recording a marginal fall of 0.1 points from 58.5 as seen in October. This, however, falls short of meeting the preliminary estimate of 59.2.
A reading above 50 indicates an expansion in activity while one below 50 denotes a contraction.
A report released Wednesday by the HSBC India Services Purchasing Managers’ Index highlighted that service providers in India attribute the strong performance to growth in demand and new business gains. It further said that increased business activity “added to firms’ capacity pressures subsequently boosting job creation,” adding that employment growth in the sector reached a historic high in November.
“During November, services sector employment notably grew at the fastest pace ever recorded since this survey began in 2005. The hiring surge reflected the sector’s improving business confidence, growing new orders, and vigorous international demand,” Pranjul Bhandari, chief India economist at HSBC said.
More jobs could aid in increasing declining consumer spending in the economy, a significant factor affecting GDP data from the previous quarter. India’s growth slowed to 5.4 percent in the July-September quarter, down from 6.7 percent in April-June.
At the same time, high food and labour costs drove up input and output prices. Input costs saw the highest increase in 15 months, while output prices increased at the fastest rate in close to 12 years. The rise in food and labour input prices led to an increase in business costs in the middle of the third quarter of FY 2024-25. This “upward pressure” resulted in a significant inflation rate for service sector firms, the highest in 15 months.
Service firms raised output prices to alleviate some of these cost pressures, although some indicated that the “increases were backed by strong demand”.
The report noted that external demand from Asia, Europe, Latin America, and the US contributed to a rise in export sales. The pace of new export orders was the fastest in three months, indicating improved demand for services from international customers.
Business confidence in the sector reached its highest point since May. Over the next year, surveyed managers expressed optimism about sustained demand and marketing initiatives to generate new business.
This robust performance in the services sector stood in contrast to India’s manufacturing PMI, which fell to 56.5 in November—an 11-month low.
The HSBC India Composite Output Index (a weighted average of manufacturing and services PMI) was 58.6 in November, a slight decline from 59.1 in October, reflecting a strong rate of growth.
Also read: Manufacturing & construction drag Q2 GDP growth to 5.4%, much lower than RBI’s 7% estimate