India's Services PMI hits 6-month high on strong new Business Growth

In January, the growth of the services sector in India reached its highest point in six months, with a surge in new business driven by strong demand from both domestic and international clients, according to a monthly survey. The seasonally adjusted HSBC India Services PMI Business Activity Index climbed to 61.8, up from 59 in December, indicating the most rapid expansion in six months. In terms of Purchasing Managers' Index (PMI), a reading above 50 signifies expansion, while a score below 50 indicates contraction.

The survey was conducted by sending questionnaires to a panel of approximately 400 companies in the service sector. "India's services PMI rose to a six-month high in January. New business expanded at a faster pace and managers' expectations for future activity was strong. The new export business index accelerated, signalling that India's services exports remained robust", Ines Lam, Economist at HSBC, said.

Export sales experienced the swiftest growth in three months, with surveyed companies reporting increased business from clients worldwide, including Afghanistan, Australia, Brazil, China, Europe, the UAE, and the US. As of the beginning of the 2024 calendar year, companies observed a continued rise in their overall expenses, citing food, labor, and freight as the primary contributors to cost pressures on the prices front.

However, with the vast majority of panelists opting to leave their charges unchanged and only 6 percent hiking them, output prices rose to the least extent in 11 months. According to the survey, business confidence has strengthened further. Besides demand strength, firms expect investment and productivity gains to induce output growth in the year ahead. Meanwhile, the HSBC India Composite PMI Output Index rose from 58.5 in December to 61.2, indicating the sharpest upturn since mid-2023.

Composite PMI indices represent weighted averages of corresponding manufacturing and services PMI indices. These weights are determined based on the proportional significance of the manufacturing and service sectors, as indicated by official GDP data. "January data highlighted a further acceleration in the growth of Indian private sector output, amid quicker increases at both goods producers and service providers", the survey said. Service providers led the upturn, although both segments recorded faster rates of expansion in new business, the survey added.