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High growth in Indian services sector

High growth in Indian services sector: According to a monthly survey, India’s services sector growth reached a 13-year high in July as a significant improvement in demand conditions and an uptick in overseas sales led to the fastest rise in new business and output. According to the seasonally adjusted S&P Global India Services PMI Business Activity Index, output increased by the most since June 2010—from 58.5 in June to 62.3 in July.

For the 24th straight month, the headline figure was above the neutral 50 threshold. In Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction. “The resilience of the service sector underscores its vital role in fuelling India’s economy, with the PMI results for July so far pointing to a notable contribution from the sector to overall GDP for the second fiscal quarter,” Said by Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

Members of the survey stated that new business growth and strong demand were the main causes of the improvement. In July, the demand for Indian services improved to the largest extent in more than 13 years, according to about 29% of survey respondents who reported stronger inflows of new business. “The significant growth in sales on both domestic and foreign markets are exceptionally encouraging news, especially in view of the difficult global economic environment. Companies noticed a significant increase in the export of services to a number of countries, including Bangladesh, Nepal, Sri Lanka, and the UAE.

Cost pressures grew more intense, and monitored businesses indicated rising expenses for food, labor, and transportation. Due to enterprises’ caution in their pricing tactics, charges increased to a lesser amount despite the rise in cost pressures. “Looking at PMI price indices in recent months, it seems that competitive advantage continued to support demand for Indian services, with increases in output prices here modest relative to several other nations.

Despite a slight increase in input cost inflation in July, service providers continued to be cautious when deciding on prices so as not to discourage customers. On the employment front, businesses kept expanding their workforces by bringing on a mix of part-time, full-time, permanent, and temporary employees. Employment in the service sector increased at a slow rate that was largely consistent with the previous two months.

On the year-ahead outlook for business activity, service providers on average were optimistic. Growth expectations stemmed from forecasts of demand strength and marketing initiatives.Meanwhile, the S&P Global India Composite PMI Output Index — which measures combined services and manufacturing output — rose from 59.4 in June to 61.9 in July.

“July data signalled a substantial increase in private sector activity across India, with the rate of expansion quickening to a 13-year high,” the survey said.

S&P Global compiles the S&P Global India Services PMI from responses to questionnaires distributed to a panel of over 400 service sector companies. Based on contributions to GDP, the panel is stratified by detailed sector and corporate employee size.



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