India's services sector growth surges to 5-month high in August: PMI

India August service PMI: The PMI climbed to 60.9 in August, fuelled by by increase in new domestic orders

India's services sector experienced its fastest growth in five months this August, driven by resilient demand and easing inflationary pressures, according to HSBC India Services Purchasing Managers' Index (PMI), compiled by S&P Global. India's PMI climbed to 60.9 in August, up from July's 60.3, surpassing the preliminary estimate of 60.4.

This marks the highest PMI level since March and extends the sector's expansion streak, which has been sustained above the 50-mark separating growth from contraction since August 2021. The latest reading is also significantly above the long-term average, indicating robust growth within the sector.

Pranjul Bhandari, chief India economist at HSBC, attributed this growth to a surge in new orders, particularly from the domestic market. "This growth was largely fuelled by an increase in new orders, particularly domestic orders," Bhandari said, adding, "Employment levels remained robust, though there was a slight decrease in the pace of hiring compared to July."

The new business sub-index saw a slight increase from July, reaching a four-month high and remaining above its historical average.

International orders slow down

While international demand also remained strong, the pace of growth in this segment slowed to a six-month low, reflecting softer global conditions. Despite this, the overall outlook remained positive, although business confidence slipped to its lowest level in over a year.

Cost pressures up in service sector

Cost pressures within the sector rose moderately in August, driven by elevated food, labour, and transportation costs. However, the increase in input costs faced by service providers slowed to a four-year low.

Services posted the sharpest increase in input costs during August, the report said.

"On a positive note, input costs rose at their slowest pace in six months, with both the manufacturing and service sectors exhibiting the same pattern. Consequently, output price inflation receded in August," added Bhandari.

In contrast to the services sector's strong performance, the manufacturing sector saw a slight dip, with its PMI dropping to a three-month low of 57.5 in August.