India's Services Sector Hits 5-Month High

India's services sector  reaches five-month high in August

India’s services sector has experienced a significant growth in August, a five-month high, according to the data provided by HSBC India Services Purchasing Managers' Index (PMI) and S&P Global.

PMI Data

The Services Purchasing Managers' Index (PMI) rose to 60.9 in August, an increase from 60.3 in July, reaching its peak since March. The growth in India’s service sector is credited to strong demand and a reduction in inflationary pressures.

"This growth was largely fuelled by an increase in new orders, particularly domestic orders," said Pranjul Bhandari, chief India economist at HSBC.

Factors Leading to Growth

The survey indicated that fresh business orders, particularly within the country, were crucial in propelling the expansion, as the new business sub-index soared to its highest point in four months.

The reading indicated that it has surpassed the 50-mark threshold separating expansion from decline since August 2021, exceeded the long-term average and reached its peak since March.

The latest business sub-index experienced a minor rise from July, setting a new record for the fourth month in a row and surpassing past records. Although demand from abroad stayed strong, the rate of growth slowed down significantly, falling to its lowest point in six months since July.

"On a positive note, input costs rose at their slowest pace in six months, with both the manufacturing and service sectors exhibiting the same pattern. Consequently, output price inflation receded in August," Bhandari added.

Notably, recruitment in the service industry maintained a consistent level, even though it decelerated to its lowest point since April. Price pressures slightly escalated because of higher costs for food, labor, and transportation. 

According to Reuters poll data, the inflation is expected to average 4.2% this quarter and 4.6% in the next.