NEW DELHI: India’s services economy grew in August, but the pace of expansion was the slowest in more than four years, as subdued bookings and intense competition tempered an otherwise resilient demand, a private survey showed on Thursday.
The seasonally adjusted HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 54.1 in August from 53.3 in July. The headline reading was slightly below its long-run average of 54.5 and, despite the August improvement, remained the second-weakest since March 2022. A PMI above 50.0 signals expansion in activity.
New business grew at a faster pace, helped by stronger customer demand and marketing initiatives. International demand also remained supportive, with new export orders rising solidly and at a similar rate to July, the survey noted. Companies reported gains from clients in markets including Australia, Brazil, Canada, Japan, Malaysia, Singapore, Sri Lanka and the UAE.
Even so, the increase in export sales remained below its average over the past year. Some firms also reported subdued bookings, intense competition, weaker client interest in selected services and reduced transport operations, the survey said.
“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, with some firms citing subdued bookings, competition and reduced transport operations,” said Pranjul Bhandari, chief India economist at HSBC.
“Employment increased at a marked rate, with job creation reaching a 15-month high. 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 added.
Around 11% of survey respondents reported higher staffing levels, linking the increase to efforts to support customer service, sales and digital operations. The rate of job creation was marked and the strongest in 15 months, the survey said.
Outstanding business fell for a second consecutive month, although only marginally. Firms reporting a decline attributed it to softer inflows of new work and the timely completion of incoming requests.
Input-cost inflation edged up only slightly in August and remained moderate by historical standards. Companies reported higher spending on digital platforms, electricity, inputs, labour, marketing and regulatory requirements. Prices charged for Indian services, meanwhile, rose at the fastest pace since March as firms passed higher operating costs on to clients
The slowdown in growth weighed on business confidence. Sentiment around the year-ahead outlook was broadly unchanged from July and remained below its long-run average.
Service providers nevertheless remained hopeful that market conditions and demand would improve, with technology adoption and new enquiries also supporting optimism, the survey said.
An acceleration in services activity offset a slowdown in manufacturing, leaving the pace of private-sector growth unchanged in August.
The HSBC India Composite PMI Output Index stood at 54.3 in August, matching July and signalling growth that was jointly the slowest in four-and-a-half years and below the historical trend.
Total sales growth quickened from the previous month but remained the second-weakest since February 2022. Goods producers reported a slowdown, while service providers recorded a faster increase in sales.
Aggregate employment rose at the fastest pace in 14 months, as job losses among manufacturers were more than offset by robust hiring in services. At the composite level, input-cost inflation eased to a seven-month low, while charge inflation accelerated to its strongest since April, the survey said.
