Services activity hits 3-month low in June

A pickup in prices charged by services companies combined with the easing of business activity and a slower increase in new export business led to the decline of S&P Global India Services PMI Business Activity Index to 58.5 in June, compared with 61.2 in May.

This is the second month of decline after services PMI had scaled a 13-year high of 62 in April. A value of over 50 denotes expansion.

Despite the easing, growth prospects strengthened as firms expected demand conditions to improve.


“Demand for Indian services continued to surge higher in June, with all four monitored subsectors registering quicker increases in new business inflows,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

The 400 service firms highlighted healthy demand and marketing initiatives as major contributors for the uptick in new business. The better outlook bodes well for the economy, as manufacturing is expected to ease owing to the global slowdown.

“We expect the services sector to anchor domestic growth this fiscal year, as the manufacturing sector may come under some pressure owing to headwinds from a global growth slowdown,” said Rahul Bajoria, head of EM Asia (ex-China) economics, Barclays.

Across the four sub-sectors monitored by S&P Global—consumer (excluding retail), transport, information, communication, finance, insurance, real estate and business services—consumer services registered the strongest increases in intakes of new work, business activity, employment and input costs, the release stated. The rate of job creation for the services industry as a whole was the joint-fastest in six months.

“Bullish pick-up in growth momentum supported a further sharp upturn in business activity and encouraged another uplift in employment figures, boding well to near-term growth prospects,” De Lima added.

On the inflation front, the rate was the fastest in nearly six years as firms passed through greater input and staff costs to clients.

“The latest PMI results for output charges coupled with upside risks to food prices suggest that interest rates are highly unlikely to be reduced as 2023 progresses,” De Lima said.

S&P Global Ratings expects the central bank to hold rates till the end of this year and deliver the first cut in early 2024.

The RBI’s Monetary Policy Committee will likely hold the policy rate at 6.5% for the third consecutive time in its August meeting.