Services sector growth hits 15-year high in August on robust demand

Steepest expansion since 2010 aided by strong rise in international sales, according to PMI

India's services growth accelerated to a 15-year high in August on robust demand, which also pushed prices higher at the fastest rate in over a decade, said a private survey on Wednesday.

 

The HSBC India services purchasing managers’ index (PMI), compiled by S&P Global, rose to 62.9 in August from 60.5 in July. It has been the third straight month the index has held above 60, underscoring resilient demand in the world’s fastest-growing major economy.

 

“This indicated the steepest rate of expansion since June 2010. Demand buoyancy, efficiency gains and greater inflows of new business were some of the reasons firms gave for the upturn,” said the survey. PMI has been above the neutral 50 mark, which separates contraction from expansion, for 49 months straight.

 

 

The rise in international sales was the third-strongest since the series started in September 2014. 

 

"Robust job creation in recent months meant that companies had sufficient capacity to cope with current requirements. Outstanding business increased only marginally, and there was a modest uptick in employment. Amid reports of higher salaries awarded to workers and overtime payments, business expenses rose further," the survey noted.

 

The services sector mirrors strength in the manufacturing sector, which grew at its fastest pace in nearly 18 years in August despite rising global uncertainty and the US imposing punitive tariffs on India.

 

Pranjul Bhandari, chief India economist at HSBC, said India’s services PMI reached a 15-year high in August on the back of “surging new orders”. A broad-based expansion in international sales bolstered overall demand, prompting companies to hire additional workers.

 

“Reflecting higher labour costs and robust demand conditions, both input and output prices increased substantially in August. Meanwhile, the composite PMI rose to a seventeen-year high of 63.2 in August, which indicated strong broad-based output growth in both the manufacturing and service sectors,” she said. 

 

Services companies said robust demand allowed them to pass on rising expenses to clients. The rate of charge inflation accelerated to the steepest in over 13 years.

 

"Business expenses increased to the largest extent since last November. Higher labour costs (salary hikes and overtime payments) featured in the qualitative part of the survey as the main source of price pressure, with a few mentions of greater transportation fees and material costs," said the survey.

 

Hiring growth moderated in August as anecdotal evidence showed an increase in part-time recruitment. "Sustained job creation helped service providers to somewhat stay on top of their workloads. Outstanding business volumes still expanded in August, but did so only marginally and at the weakest pace in close to a year."

 

The PMI number comes after provisional estimates by the National Statistics Office for the first quarter of FY26, released on Friday, showed that the economy expanded 7.8 per cent, beating forecasts. Economists reckon that the high-frequency data suggest the resilience has likely continued into the second quarter as well.