At 62.3, India’s services sector growth fastest in 13 years on strong demand, ETCFO

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<p>At 62.3, India's services sector growth fastest in 13 years on strong demand</p>
At 62.3, India’s services sector growth fastest in 13 years on strong demand

India’s services sector expanded at its fastest pace in 13 years last month as demand increased significantly despite elevated inflationary pressures, a private survey showed on Thursday.

S&P Global’s India services purchasing managers’ index rose to 62.3 in July from June’s 58.5. It was the highest index reading since June 2010 and has remained above the 50-mark that separates growth from expansion for two years.

According to the survey report the upturn in total new orders was boosted by a pick-up in international sales. Service providers noted the second fastest increase in new export orders since the series started in September 2014. Bangladesh, Nepal, Sri Lanka and the UAE were key sources of growth.

“The resilience of the service sector underscores its vital role in fuelling India’s economy, with the PMI results for July so far pointing to a notable contribution from the sector to overall GDP for the second fiscal quarter,” noted Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

The report highlighted that the rate of inflation quickened to a 13-month high. Monitored companies signalled greater food, labour and transportation costs.

Operating costs rose at the fastest pace since June 2022 and firms passed on some of that burden to customers, albeit at the slowest pace in three months as they were cautious about their pricing strategies.

“Looking at PMI price indices in recent months, it seems that competitive advantage continued to support demand for Indian services, with increases in output prices here modest relative to several other nations,” added De Lima.

When assessing the year-ahead outlook for business activity,service providers on average were optimistic. Growth expectations stemmed from forecasts of demand strength and marketing initiatives. The overall level of positive sentiment slipped from June’s six-month high, however, owing to concerns surrounding extreme weather, the survey report said.

Firms continued to add headcount, stretching the current sequence of hiring to more than a year. However, little-changed from June the rate of hiring remained weak.

The report said that Finance & Insurance was the brightest spot regarding business activity and new orders, topping the growth rankings in both instances.

  • Published On Aug 3, 2023 at 11:18 AM IST

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