In a recent business survey, India’s services sector continued its expansion in February, maintaining a growth trajectory albeit at a slightly slower pace, while inflationary pressures witnessed a cooling trend. The data, reflected in the HSBC India Services Purchasing Managers’ Index (PMI), suggests optimism in the industry, a key driver of economic growth and job creation.
The HSBC India Services PMI, compiled by S&P Global, recorded a figure of 60.6 in February, down from January’s six-month high of 61.8. Despite this slight dip, the index has consistently remained above the crucial 50-mark since August 2021, signifying sustained growth in the sector.
Ines Lam, economist at HSBC, observed, “India’s services PMI suggests that the pace of expansion in the services sector eased in February from January.” Lam noted that this was attributed to a slowdown in growth in new orders and output. While the outlook for future business activity remained positive, there was a slight weakening, reflecting the challenges faced by services companies.
The gauge of new business, a key indicator of demand, softened to a six-month low but has maintained an expansionary trend for over two-and-a-half years. Orders from abroad exhibited resilience, contributing to the overall positive outlook for the services sector.
However, the survey highlighted a less optimistic outlook for the coming 12 months, with business optimism at its lowest since November. Hiring activities slowed down, and employment generation was only marginally in positive territory.
On a positive note, firms experienced some relief from inflationary pressures. Operating costs rose at the slowest pace since December, with the impact somewhat passed on to customers, resulting in the slowest rise in prices charged in two years.
The broader economic landscape, with India’s retail inflation touching a three-month low in January, suggests that inflation is expected to remain within the Reserve Bank of India’s target range of 2%-6% in the coming months. Despite this, a Reuters poll indicates that it may be at least until July before the central bank considers cutting borrowing costs.
While India’s manufacturing industry showed robust growth in February, the marginally slower expansion in services activity brought the HSBC India Composite PMI Output Index lower to 60.6 from the previous month’s 61.2. The overall economic scenario indicates resilience but underscores the need for continuous monitoring in the face of evolving challenges.
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