Active Stocks
Mon Apr 15 2024 13:34:03
  1. Tata Steel share price
  2. 161.10 -1.47%
  1. ITC share price
  2. 426.25 -0.90%
  1. Tata Motors share price
  2. 1,003.40 -1.47%
  1. Wipro share price
  2. 463.15 -1.65%
  1. State Bank Of India share price
  2. 761.75 -0.65%
Business News/ Economy / India Services PMI: Growth cools in February as orders, output slow down
BackBack

India Services PMI: Growth cools in February as orders, output slow down

Despite the slowdown, the February survey revealed strong demand throughout the services sector, marking the 31st consecutive month of expanding new business inflow

Indian companies operating in the service sector sought to protect their margins by raising prices charged to customers in February. (Image: Pixabay)Premium
Indian companies operating in the service sector sought to protect their margins by raising prices charged to customers in February. (Image: Pixabay)

New Delhi: India’s services sector growth, which hit a six-month high in January, eased a little last month amid softer increases in new orders and output, according to a private survey on Tuesday.

The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 60.6 in February, down from 61.8 in January. The reading has remained above the 50 mark that separates expansion from contraction for 31 months now.

Last month’s decline in services sector growth comes along side a continued recovery in manufacturing sector growth, which hit a five-month high in February, fuelled by a significant rise in orders amid mild input cost inflation.

India's services sector—among the world's fastest-growing—contributes more than half of country's gross domestic product (GDP), and the robust performance in recent months is expected to help the country achieve its targeted economic growth for the fiscal year that ends on 31 March.

The Reserve Bank of India in February raised its GDP growth forecast for FY24 to 7% from the previous 6.5%, while the statistics ministry last week raised its estimate to 7.6% in its second revised estimate, up from 7.3% in the first advance forecast.

“India’s services PMI suggests that the pace of expansion in the services sector eased in February from January. Due to a slowdown in growth in new orders and output, services companies’ outlook for future business activity, while remaining strongly positive, weakened slightly," said Ines Lam, an economist at HSBC. “Prices charged for services rose at the slowest rate in 24 months as input prices inflation moderated."

Despite a slowdown, the February survey revealed strong demand throughout the services sector, marking the 31st consecutive month of expanding new business inflow. Although the growth rate in February dipped from January's peak, it still significantly exceeded the long-term average.

Granular data showed that business activity increased across the sector, the survey said. Finance and insurance led growth, while real estate and business services lagged.

The survey also highlighted an increase in overall expenses for service companies in February, attributed to costs related to food, labour, and freight, although the inflation rate remained below average and was the weakest in two years.

On the brighter side, February gains for Indian services from across the world, including from Australia, Asia, Europe, the United Arab Emirates and the Americas.

"New business from abroad placed with services firms in India rose for the 13th successive month," the survey said. “Indian companies operating in the service sector sought to protect their margins by raising prices charged to customers."

The HSBC Global India Services PMI, compiled from questionnaire responses from approximately 400 service sector companies, serves as a crucial economic health indicator.

Recent government data showed that the Indian economy soared ahead in the December quarter (the third quarter of FY24) with a surprise growth of 8.4%, belying fears of tempering as manufacturing, electricity and construction sectors put up a robust show.

HSBC's latest survey on India's manufacturing PMI in February marked the fastest growth in five months at 56.9. However, the composite PMI, which includes both manufacturing and services indices, decreased slightly to 60.6 in February from a six-month high of 61.2 in January, indicating a slightly softer yet sharp expansion rate.

“Business confidence regarding the year-ahead outlook for activity weakened in February. Still, around 26% of companies foresee growth and only 2% anticipate a fall," the survey said.

The survey attributed the optimism among firms to factors such as buoyant client demand, enhanced publicity, and improved customer relations.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Rhik Kundu
Rhik writes about the Indian economy and its crucial indicators. He is constantly navigating corporates, decoding policies, and dabbling with everything in between.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 05 Mar 2024, 01:52 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App