Services PMI hits 5-month high of 58.8 in April on strong domestic demand

Growth was driven by stronger domestic demand and new orders, even as export growth weakened and cost pressures remained elevated

India’s services activity expanded at its fastest pace in five months in April, helped by stronger domestic demand, higher ecommerce activity, and improved new order inflows, according to the HSBC India Services PMI released on Wednesday. The seasonally adjusted index rose to 58.8 in April after touching a 14-month low of 57.5 in March.

 

Growth was driven by stronger domestic demand, new orders, competitive pricing, and increased ecommerce activity, even as export growth weakened and cost pressures remained elevated due to the West Asia war.

 

"India’s services PMI climbed to a five-month high of 58.8 in April. Activity and new orders strengthened, even as new export orders eased, suggesting that demand is rotating from overseas markets to domestic consumers amid the West Asia conflict. Input cost inflation moderated but remained elevated, while output price inflation stayed subdued, indicating that some firms are absorbing higher costs rather than passing them on. India’s composite PMI also rose to 58.2 last month, up from 57.0 in March, pointing to renewed momentum across the manufacturing and services sectors." said Pranjul Bhandari, chief India economist at HSBC.

 

 

Domestic demand offsets weaker export growth

 

A shift from international to domestic suppliers amid the West Asia conflict provided a notable boost to transport activity during April. However, international demand for Indian services weakened during April.

 

The seasonally adjusted New Export Business Index declined by more than five points to its second-lowest level in over a year. Companies attributed the slowdown to the ongoing West Asia conflict and subdued inbound tourism, both of which weighed on external sales.

 

Cost pressures ease slightly but remain elevated

 

Services firms reported a sharp increase in operating expenses in April. Although input cost inflation eased from March, it remained among the highest levels recorded since November 2024.

 

Higher prices for food items, including cooking oil, eggs, gas shortages, meat and vegetables along with increases in gas and labour costs, drove overall expenses.

 

Despite the rise in costs, only part of the burden was passed on to customers. Output charges increased at the slowest pace in three months, indicating that some companies continued to absorb higher input costs. Inflation in both input costs and output prices was most pronounced in the consumer services and transport, information and communication segments.

 

Business confidence softens despite strong growth

 

While services firms remained optimistic about future activity, overall business confidence weakened compared with March. Survey respondents cited concerns over the West Asia conflict and sustained cost pressures as key risks to the future outlook.

 

Hiring gains momentum as new business rises

 

Stronger growth in new business supported an increase in hiring at the start of the first fiscal quarter. Higher volumes of incoming work prompted firms to recruit short-term staff and junior-level employees.

 

Employment rose across all four broad areas of the services economy tracked by the survey. Continued hiring also helped firms reduce outstanding business volumes for the first time in four months, although the pace of backlog reduction remained marginal.

 

Composite PMI also strengthens

 

The HSBC India Composite PMI Output Index rose to 58.2 in April from 57.0 in March, signalling a faster expansion in private sector output as both manufacturing and services activity regained momentum.

 

At the composite level, input price inflation moderated from March but remained the second-highest since August 2023. Meanwhile, selling prices increased at the slowest pace in three months.