New Delhi reported that India’s services sector growth displayed resilience in April, with the pace of expansion in new business and output maintaining levels that rank among the highest over the past 14 years. The economic landscape proved accommodating for the sector’s growth, buoyed by robust demand, as per findings from a monthly survey revealed on Monday.
The seasonally adjusted HSBC India Services Business Activity Index demonstrated a minor dip, contracting from 61.2 in March to 60.8 in April. Yet, this marginal decline did not overshadow the overarching narrative of strengths, as the latest figure still represents one of the most vigorous periods of growth on record in nearly 14 years.
According to feedback from the survey participants, this considerable boost in output arose from a confluence of favorable economic circumstances, sturdy demand, and a swell in the acquisition of new work. To decode the measurements of the Purchasing Managers’ Index (PMI), an index reading above the threshold of 50 delineates expansion, whereas a value below it indicates a contraction.
“April has witnessed a slight deceleration in the service activity growth trajectory; however, it’s supported by a continued surge in new orders. Notably, domestic demand has shown substantial vigour,” reported Pranjul Bhandari, Chief India Economist at HSBC.
The impressive domestic market performance was complemented by an accrual of new business from a plethora of international arenas, together contributing to the second-fastest increase in global sales since records commenced in September 2014.
When it came to employment dynamics within the service realm, certain Indian providers revealed a heightened inclination towards staff augmentation in April, correlating with the increased influx of new work. Nevertheless, a share of these companies expressed the belief that their present workforce numbers were adequate to meet the demand, resulting in a marginal and relatively subdued level of job creation when compared with the concluding quarter of the preceding fiscal year.
“In an effort to manage the uptick in new orders, firms did pursue staff expansions but noted a slowdown in the rate of employment growth,” Bhandari elaborated.
Turning to cost considerations, a combination of climbing wages and escalating food prices prompted a rise in operational costs for service companies, which, in turn, were only partly relayed to the consumer base through raised output charges.
“Even as input costs continue to mount at a significant rate, albeit at a slower pace than in March, service firms are facing compressed profit margins, as just a portion of these price hikes is being passed through to clients,” Bhandari highlighted.
An emerging sentiment of confidence regarding the forthcoming year’s business prospects was viscerally felt amongst service providers, climbing to a three-month peak. Enhanced marketing initiatives and strides in efficiency, coupled with strategies centered on competitive pricing and a general anticipation of ongoing favorable demand conditions, fueled this optimistic outlook.
The survey also observed that the HSBC India Composite PMI Output Index, which gauges consolidated private sector output encompassing both manufacturing and service sectors, regressed slightly to 61.5 in April from a reading of 61.8 in March. Despite this marginal downturn, the index’s level was one of the loftiest observed in close to fourteen years, signaling a robust expansion rate across the private sector.
“Reflecting upon the broader industry activities, the collective output from the manufacturing and service sectors saw a marked rise in April. Despite a fractionally slower pace, this points to the sustained robustness of these sectors,” Bhandari stated.
In the month of April, the manufacturing sector edged out its service counterpart by registering a more pronounced growth in the inflow of new business. Aggregate sales escalated sharply, marking one of the most rapid ascents observed since the middle of 2010.
Composite PMI indices are statistically composed as weighted averages, merging corresponding indices from the manufacturing and services sectors. These weights are calculated to mirror the relative economic footprints of the manufacturing and service sectors based on official Gross Domestic Product (GDP) data.
