Buoyant demand pushes India's services PMI to 6-month high in January

An increase in new business activity due to the buoyant demand from domestic and external clients pushed growth in India's dominant services sector to a six-month high in January, as the headline Purchasing Managers' Index (PMI) figure rose to 61.8 in January from 59 in December, showed the survey released by S&P Global in partnership with HSBC on Monday.

"The upturn was cemented by the quickest increase in new business since last July, which stemmed from buoyant demand from domestic and external clients. New export sales rose at the fastest pace in three months," the survey said.

The January figure marks 30 months of the index remaining above the 50-mark since July 2021. A reading above 50 in the survey indicates expansion of the sector and a figure below that suggests contraction. The survey polled around 400 companies in transport, information, communication, finance, insurance, real estate, non-retail consumer and business services.

The survey noted that companies reported an increase in their overall expenses at the start of the 2024 calendar year, with food, labour and freight identified as the key sources of cost pressures. However, selling charges were raised to a lesser extent.

"Amid reports of higher food, freight and salary costs, there was another increase in the overall expense of Indian services companies in January. The rate of inflation was marked the fastest in five months and above its long-run average. That said, with the vast majority of panellists opting to leave their charges unchanged and only 6 per cent hiking them, output prices rose to the lowest extent in 11 months," the survey notes.

Data showed that consumer services by far led the rise in input costs, but it was in transport, information & communication that the quickest increase in selling prices was registered.

Ines Lam, economist at HSBC, said that new business expanded at a faster pace and managers' expectations for future activity were strong.

"The new export business index accelerated, signalling that India's services exports remained robust," he added.

Besides, the data showed an upturn in new export orders at Indian service providers in January, as the firms signalled gains from clients across the globe, including Afghanistan, Australia, Brazil, China, Europe, the UAE and the US.

"Business confidence improved further at the start of the final fiscal quarter, with services companies at their most upbeat since last September. Besides demand strength, firms expect investment and productivity gains to induce output growth in the year ahead," the survey added.

Employment also increased at a slight pace in January, albeit one that was the most pronounced in three months as a further expansion in outstanding business volumes supported job creation. Also, the latest rise in backlogs was slight and broadly in line with its trend, despite quickening to a five-month high.