India’s services sector growth rises to a four-month high in December
- The survey, which quoted responses from 400 service providers, indicated output growth increased in December as firms recruited additional workers.
New Delhi: Business activity gained momentum in December driven by demand buoyancy in the services sector, rising to a four-month high during the month, even as manufacturing growth slowed.
Output growth increased during the month as firms recruited additional workers, indicated an HSBC survey of 400 service providers.
The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 59.3 in December, up from 58.4 in November, 58.5 in October, and 57.7 in September.
It has been above the 50-point threshold that distinguishes expansion from contraction for 41 straight months.
During December, there was a softer increase in cost burdens, though greater outlays on food, labour, and materials were reported as selling price inflation also eased during the month, the survey said.
"Buoyant underlying demand was identified by companies as the primary factor behind output growth. Not only did new orders increase for the forty-first month in a row, but also to the greatest extent since August 2024," it added.
Services momentum
The services sector—a cornerstone of India’s economy—contributes more than half of the country’s gross domestic product, or GDP.
India's economy surged 8.2% in fiscal year 2023-24, bolstered by a 7.8% expansion in the January-March 2024 quarter and surpassing the Reserve Bank of India’s projected 7% growth rate for that fiscal year.
However, GDP growth softened to 6.7% in the first quarter of 2024-25, its slowest pace in five quarters. India's economic growth further slowed to 5.4% in the second quarter of FY25, the slowest in nearly two years, owing to a slowdown in manufacturing and urban consumption and disappointing corporate earnings.
India’s finance ministry recently said it expects the economy to grow at 6.5% in 2024-25, while the Reserve Bank of India estimates a 6.6% growth aided by rural consumption, government investment, and strong services exports.
India’s manufacturing growth slowed to a 12-month low in December amid a softer increase in factory orders and production. The HSBC India Manufacturing Purchasing Managers Index (PMI) dropped to 56.4 in December from 56.5 in November, and was below October's 57.5 and September's 56.5 readings.
But India's services sector provides optimism.
“India’s services companies expressed strong optimism in December as business activity growth surged to a four-month high. Forward-looking indicators such as new business and future activity suggested that the strong performance will likely continue in the near future," said Ines Lam, an economist at HSBC.
"The easing of input price inflation in the month also supported business sentiment. Strength in the services PMI stands in contrast with the growing signs of a slowdown in the manufacturing industry," Lam added.
Composite output index
The HSBC India Composite Output Index, a gauge of the combined services and manufacturing output, rose to 59.2 in December from 58.6 in November, and above October's 59.1 reading and September's 58.3.
"Private sector companies in India posted a faster increase in output at the end of the calendar year. The acceleration was driven by service providers who recorded a quicker increase in business activity when factory production growth softened," the survey said.
"Similarly, the fastest increase in new business at services firms more than offset a fractional slowdown at goods producers. As a result, aggregate sales expanded at a stronger rate," it added.
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Business NewsEconomyIndia’s services sector growth rises to a four-month high in December
First Published:6 Jan 2025, 12:20 PM IST
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