A recent business survey by S&P Global highlights a significant upswing in India’s services sector, marking its most robust expansion in six months. The data reveals a surge in demand as the HSBC final India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, climbed to 61.8 last month, surpassing the previous month’s 59.0 and exceeding the preliminary estimate of 61.2.
Optimism Reaches Four-Month High, Output Prices Show Moderation
The survey also indicates a positive sentiment within the sector, with optimism hitting a four-month high. Moreover, output prices experienced the slowest rate of increase since February 2023, contributing to an overall favorable outlook.
New Business Sub-Index Signals Accelerated Demand
The new business sub-index, remaining in expansionary territory for two-and-a-half years, highlights the accelerated pace of demand. The sub-index suggests that demand rose at the quickest pace since July, with exports reaching a three-month high.
Optimism Translates into Year-End Confidence, Prompting Hiring
The upbeat sentiment extends into the final quarter of fiscal year 2023-24, as confidence regarding year-ahead activity reaches its highest point since September. This positive outlook prompts businesses to continue hiring despite the operating costs rising at the fastest pace since August.
Inflation Moderation Amidst Economic Growth
Despite operating costs increasing rapidly, prices charged experienced the slowest pace of growth in almost a year, indicating a moderation in inflation. This is noteworthy given that overall inflation in the country reached a four-month high in December, staying above the Reserve Bank of India’s medium-term 4 per cent target.
Central Bank Likely to Maintain Interest Rates
The combination of strong economic growth and moderated inflation is expected to lead the central bank to maintain interest rates at current levels for the next few months. This decision aligns with the broader economic landscape, where manufacturing activity is also expanding at the fastest pace in four months.
India’s Position as the Fastest-Growing Major Economy
With the overall HSBC India Composite PMI Output Index reaching a six-month high of 61.2 in January, surpassing the previous month’s 58.5, and beating a flash estimate of 61.0, the data suggests that India continues to hold its position as the fastest-growing major economy. This positive trajectory eases pressure on the government, potentially allowing for a focus on other economic aspects in the year ahead rather than stringent fiscal consolidation measures.