India services PMI expands to 54.1 in August; pace eases to over 4-year low

The seasonally adjusted HSBC India Services PMI Business Activity Index rose to 54.1 in August from 53.3 in July, supported by demand conditions and new business orders

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India’s services sector expanded in August to 54.1 driven by resilient demand, stronger output and new business, according to news agency PTI.

However, the overall pace of growth was the second-slowest recorded since March 2022, amid subdued bookings, strong competition and reduced transport operations, the HSBC India Services PMI data said.

The seasonally adjusted HSBC India Services PMI Business Activity Index rose to 54.1 in August from 53.3 in July, supported by demand conditions and new business orders.

The HSBC PMI measures the month-on-month change in the combined output of India’s manufacturing and services sectors and is an economic indicator of the business environment.

“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.

Service sector hiring rises

Despite the pace moderating, the sector continued to hire people with job creation reaching a 15-month high.

“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 said.

The sector reported higher spending on digital platforms, electricity, inputs, labour, marketing and regulatory requirements.

Export growth

The overseas demand contributed to the growth, and the new export orders largely increased in the same range as July. Companies reported new orders from clients in countries including Australia, Brazil, Canada, Japan, Malaysia, Singapore, Sri Lanka and the UAE.

However, the business confidence about the year-ahead remained broadly unchanged from July, staying below its long-run average. The firms in the service sector were nonetheless hopeful that market conditions and demand would improve, with technology adoption and new enquiries also supporting optimism.

Composite PMI Output Index

Additionally, the HSBC India Composite PMI Output Index stood at 54.3 in August, the second-weakest since February 2022. While the manufacturing sector producers noted a slowdown in growth, the service providers registered a faster expansion.

The HSBC India Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. The weights reflect the relative size of the manufacturing and service sectors according to official GDP data.

“An acceleration in growth of services activity offset a slowdown in manufacturing and left the pace of private sector growth unmoved in August. However, quicker expansions in aggregate employment and new order volumes were recorded,” it said.

(With inputs from PTI)