Strong demand pushes service sector activity to 13-year high in April, fastest output expansion since mid-2010

The S&P Services PMI Index for April also pointed out that the level of job creation had remained static despite the growth in business activity, and that input price pressures remain.

Representational image | Agencies

New Delhi: Activity in India’s services sector accelerated to a 13-year high on the back of surging demand, a widely-cited private sector monthly survey has found.

The April reading for the S&P Global India Services PMI Business Activity Index came in at 62, up from 57.8 in March. The reading in April, the report said, signals the monthly fastest expansion in output since mid-2010. The index is scored in such a manner that a reading below 50 implies a contraction, while a reading above 50 denotes an expansion in activity. A reading of 62, thus, implies a very strong expansion in activity.

“Service sector growth in India quickened substantially in April, with demand strength promoting the fastest increases in new business and output in close to 13 years,” the report said.

However, the report also said that, while companies became more optimistic about future business activity, job creation has remained “negligible”. Further, survey participants highlighted price pressures as being an issue, with input costs and output charges rising at faster rates that outpaced their respective long-run averages.

‘Increase in employment seen in April negligible’

“Input costs rose at the quickest pace in three months during April, and one that outpaced the long-run series trend,” the report said. “According to survey members, food, fuel, medicine, transportation and wages were the main sources of inflation.”

However, the main takeaway from the report was that demand for services has increased strongly, with new orders rising at the fastest pace since June 2010. The survey members attributed the growth in new orders not only to strong demand, but also to competitive pricing.

“One area of weakness highlighted in the latest results was the labour market,” Pollyanna De Lima, economics associate director at S&P Global Market Intelligence wrote in her comments included with the report. “Despite the substantial pick-up in sales growth and improved business sentiment towards the outlook, the increase in employment seen in April was negligible and failed to gain meaningful traction.”

(Edited by Poulomi Banerjee)