Boost in domestic, int'l demand drives growth in services PMI in February

The India Services Purchasing Managers' Index rose to 59 in February from a 26-month low of 56.5 in January

Growth in India's dominant services sector got a boost in February from improving domestic and international demand, as new orders placed with Indian companies rose at a faster rate, showed a private business survey released on Wednesday.

 

The HSBC final India Services Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 59 in February from a 26-month low of 56.5 in January.

 

The index has now been above the neutral 50-mark that separates contraction from expansion for 43 months straight.

 

“Boosted by improving domestic and international demand, new orders placed with Indian services companies rose at a faster rate during February. The uptick in growth underpinned a quicker expansion in output and a substantial increase in employment," the survey noted.

 

The survey also noted that though firms experienced a rise in cost burdens in February, the rate of inflation receded to a four-month low, as the rate of increase in output prices was broadly similar to January and therefore remained above its long-run average.

 

"Productivity gains, favourable underlying demand and greater intakes of new business were the key determinants of output growth, anecdotal evidence showed," the survey noted.

 

The survey further noted that gains in international orders supported growth, with service providers reporting better demand from clients in Africa, Asia, Europe, the Americas and the Middle East. Overall, external sales expanded at the fastest pace in six months.

 

"In order to accommodate for rising new business and alleviate capacity pressures, Indian services firms continued to pursue recruitment drives," the survey noted.

 

Employment expanded sharply, and at one of the fastest rates seen since data collection began in December 2005. According to panellists, full- and part-time staff were hired.

 

Pranjul Bhandari, chief India economist at HSBC, said that global demand, which grew at its fastest pace in six months, according to the new export business index, played a major role in driving output growth for India’s services sector.

 

"Meanwhile, job creation and charge inflation remained strong during February. Looking ahead, business sentiment remains broadly positive, but did slightly slip last month to its lowest level since August 2024," she added.