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India’s services sector activity expanded at a faster pace in August as stronger demand supported business activity and new orders, while employment growth reached a 15-month high, according to the latest HSBC India Services PMI survey.
The seasonally adjusted HSBC India Services PMI Business Activity Index rose to 54.1 in August from 53.3 in July. A reading above 50 indicates expansion, while one below 50 signals contraction.
Despite the improvement, the August reading was the second-weakest since March 2022 and remained marginally below its long-run average of 54.5.
“India’s services activity expanded faster in August. Growth was supported by stronger output and new business, although the overall pace was still among the weakest seen in over four years,” said Pranjul Bhandari, chief India economist at HSBC.
She said some firms cited subdued bookings, competition and reduced transport operations as factors constraining growth.
New business growth strengthens in August
New business rose at a quicker pace during the month, supported by stronger customer demand and marketing initiatives. However, the rate of expansion was still the second-slowest in nearly four-and-a-half years, with some firms reporting challenging market conditions and weaker client interest in selected services.
International demand also continued to support new business. New export orders increased at a solid pace that was broadly similar to July.
Survey respondents reported higher demand from clients in Australia, Brazil, Canada, Japan, Malaysia, Singapore, Sri Lanka and the United Arab Emirates. However, the increase in export sales remained below the average recorded over the past year.
Services employment rises at fastest pace in 15 months
Services companies continued to expand their workforce in August, with the pace of job creation rising to its strongest level in 15 months.
Around 11 per cent of survey respondents reported an increase in staffing levels, linking the rise to efforts to support customer service, sales and digital operations.
Outstanding business, meanwhile, declined for the second consecutive month, although the reduction was marginal. Companies reporting lower backlogs attributed this to softer inflows of new work and the timely completion of incoming orders.
Business confidence about activity over the next 12 months was broadly unchanged from July and remained below its long-run average. Companies remained optimistic that market conditions and demand would improve, with technology adoption and new enquiries also supporting sentiment.
Price pressures rise modestly
Input cost inflation edged up only slightly in August and remained moderate by historical standards. Firms reported higher expenditure on digital platforms, electricity, inputs, labour, marketing and regulatory requirements.
Prices charged by services companies, however, rose at the fastest pace since March as firms passed on higher operating costs to customers.
“Price pressures picked up only modestly: input cost inflation edged up slightly, while prices charged rose at the fastest rate since March as firms passed on higher operating costs,” Bhandari said.
Composite PMI unchanged at 54.3
The HSBC India Composite PMI Output Index, which combines manufacturing and services activity, remained unchanged at 54.3 in August.
Faster services growth offset a slowdown in manufacturing, leaving the overall pace of private-sector expansion unchanged from July. The reading indicated a solid pace of growth, although it was the joint-slowest in four-and-a-half years.
Aggregate employment rose at its fastest pace in 14 months as job losses among manufacturers were more than offset by robust hiring in the services sector.
At the composite level, input cost inflation eased to a seven-month low, while prices charged increased at the fastest pace since April.
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