Indian Services Sees Upturn in Business Activity

As per the survey, the seasonally adjusted HSBC India Services Business Activity Index stood at 60.3 in July, down only fractionally from 60.5 in June. In the Purchasing Managers' Index or PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

“Service sector activity rose at a slightly slower pace in July, with new business increasing further, primarily driven by domestic demand. Looking ahead, services firms remained optimistic about the outlook for the year ahead,”said Pranjul Bhandari, chief India economist at HSBC.

However, the survey also noted that new export orders increased at the third-strongest pace since the inception of the series in September 2014, amid strengthening demand for Indian services from across the world. “Some of the sources of rising export orders mentioned by panellists included Austria, Brazil, China, Japan, Singapore, the Netherlands and the US,” the survey said.

On the price front, the survey further said that higher wage and material costs continued to push up business expenses, with the overall rate of inflation quickening from June. “Stronger cost pressures and positive demand trends contributed to the steepest rise in prices charged for the provision of services for seven years,” it added.

As per the survey, favourable economic conditions and optimistic expectations for output supported recruitment among services firms. “Looking ahead, services firms remained strongly optimistic about growth prospects. Around 30 per cent of the survey panel forecast greater output volumes in the next 12 months, while only 2 per cent expect a decline,” the survey noted.

Meanwhile, the HSBC India Composite Output Index posted 60.7 in July, down only fractionally from 60.9 in June and above the crucial 50.0 no-change mark for the thirty-sixth month running. “India's composite PMI recorded another month of robust expansion in July, albeit at a slightly slower pace than in June,” Bhandari said.

Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors according to official GDP data.

“Robust demand conditions, reflected by increased new orders from both domestic and international markets, led firms to increase hiring levels. On the price front, higher wages and material costs led to a further increase in input costs,” the HSBC India economist added.