India’s dominant services industry grew faster in March 2024 amid strong demand, according to a private business survey that also showed employment increased at the fastest rate in seven months and export business expanded at a record pace.
| Photo Credit: The Hindu

Sales and business activity in India’s Services sectors clocked their biggest expansion in over 13 and a half years in March, bolstered by a record uptick in export orders, as per the HSBC India Services Purchasing Managers’ Index (PMI) which rose to 61.2 to 60.6 in February. A reading of more than 50 on the index indicates growth in activity levels.

With fresh work orders increasing capacity pressures at service providers, they raised employment levels at the joint-fastest pace since November 2022 and the highest pace since August 2023. On the flip side, input costs as well as charges levied on customers grew at a faster pace, with output charges raised at the highest rates since July 2017.

Barring real estate and business services, input costs and output charges rose at a stronger pace for all sectors, with the highest input cost inflation seen in Consumer Services and Finance & Insurance seeing the steepest surge in selling prices. Firms surveyed for the index reported higher labour and material costs as key challenges.

Though business sentiment levels remained positive, they slipped to a four-month low in March, with some concerns emerging about competitive pressures. “India’s services PMI rose in March, following a small dip in February, on the back of strong demand that spurred sales and business activity,” said Ines Lam, HSBC economist.

Finance & Insurance services saw the highest increase in output and sales. New export business rose at the fastest rate since the PMI series started in September 2014, with firms noting gains in orders from Africa, Asia, Australia, Europe, the Americas and the Middle East.

With the Manufacturing PMI also reporting a sharp uptick in March, overall private sector output grew at the second-highest pace in 13.5 years, slightly lower than the upticks recorded in July 2023. The HSBC India Composite PMI Output Index rose from 60.6 in February to 61.8 in March.

Services firms reported higher increases in expenses, and also contributed more than factories towards selling price inflation, which quickened to a five-month high.