Services sector growth at 7-month high: HSBC

Services sector growth at 7-month high: HSBC

Bangalore: India’s services sector expanded in February at its fastest pace in seven months, helped by a steady expansion of new business, even as input price pressures intensified, a survey showed on Thursday.

The HSBC Markit Business Activity Index based on a survey of around 400 companies, rose to 60.2 in February from 58.1 in January, staying above the 50 mark that separates growth from contraction for the 22nd consecutive month.

The PMI’s new business sub-index, at 59.6, recorded its strongest growth since June as market conditions improved, and developed economies recovered.

“The strong growth momentum in the services sector continued into February and accelerated, with both business activity and new business coming in stronger." said Leif Eskesen, chief economist for India & Asean at HSBC.

“Optimism about the outlook also improved."

The degree of positive sentiment in the business expectations sub-index was the strongest in 16 months.

In tandem with the strong growth momentum, input prices increased in February, driven primarily by higher costs for staff, food and fuel. Still, the rise in input costs slowed marginally from January’s 30-month high.

Growth in the input prices sub-index is likely to remain strong in the near term, propelled by world crude oil prices that are near record highs, and inflation that refuses to fall despite the Reserve Bank of India (RBI) raising rates seven times in the past 12 months.

Eskesen said upside pressure on input costs underscored the “prevalence of strong underlying inflation pressures and the need for further RBI monetary policy tightening."

The union budget presented on Monday by finance minister Pranab Mukherjee did little to fight soaring prices, and focused mostly on increased spending in the social sector to appease angry voters.

The budget also included surprise decisions to extend the minimum alternate tax to units in special economic zones -- many of which are housed by service companies, in addition to widening the scope of services to be taxed.

India’s manufacturing sector expanded at its fastest pace in three months in February as more new orders poured in, but input prices rose at a record pace, a survey showed on Tuesday.