India's services sector shows strongest growth rates in around 14 years: PMI data

India's services sector moderated in April on a monthly basis, yet it maintained strength due to strong domestic and international demand, leading to heightened business confidence reaching a three-month peak, as per by a survey released on Monday.

India's HSBC Services Purchasing Managers' Index fell to 60.8 in April from 61.2 in March. Preliminary estimate pegged the figure at 61.7. Even though the headline figure shows a moderation, it remained one of the fastest growth rates in just under 14 years, the firm said in a press release.

Since August 2021, the services sector has consistently remained above the threshold of 50, which distinguishes growth from contraction.


A similar dataset tracking India's manufacturing sector too showed that there was some moderation in April, to 58.8. This softening in manufacturing & services dragged the overall Composite PMI reading of India to 61.5 from March's eight-month high of 61.8.

Yet, this was one of the highest reading seen in close to 14 years.

India's services sector, still dominant

Positive market conditions and strong demand propelled the new business sub-index to its highest level in three months, marking the third-highest level in around 14 years.

"India's service activity rose at a slightly softer pace in April, backed by a further rise in new orders, with notable strength in domestic demand," noted Pranjul Bhandari, chief India economist at HSBC.

Business activity in finance and insurance saw a 'steep' growth, survey showed.

Furthermore, services company noticed the second-fastest increase in new export business in the near ten-year series history. Gains were seen in countries in Asia, Africa, Europe, Americas and the Middle East.

"Although new export orders remained robust, they showed a slight moderation from March," she added.

Higher food prices and wage pressures turned out to be cost burdens for the respondents to the survey, and the firms passed them on to their customers. The Consumer Services segment saw by far the sharpest
increase in input costs, the survey showed.

"In response to increased new orders, firms expanded their staffing levels, though the pace of hiring growth decelerated. Input costs continued to rise sharply, albeit slower than in March, but resulted in squeezed margins for service firms, as only part of the price rise was passed on to clients through output charges," Bhandari said.