India’s service sector growth rebounds in October on higher demand
- Buoyed by resilient consumer demand, India's services sector defies cost pressures, driving job creation to a two-year high.
India’s services sector bounced back in October, buoyed by strong customer demand after a lull in September, according to a survey released on Wednesday.
The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, climbed to 58.5 in October from 57.7 in September, highlighting 39 consecutive months of above the 50-point threshold that distinguishes growth from contraction.
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The index had surged to 60.9 in August and has stayed above 60 through much of the current fiscal year. Based on responses from around 400 service sector firms, the survey reveals robust domestic and international demand, spurring companies to hire at the fastest pace in over two years.
Despite facing sharp increases in wages and food costs, which drove up input prices, businesses passed on these costs by raising selling prices, the survey noted.
"Robust sales pipelines and strong demand conditions supported the upturn in business activity. The rate of sales growth was historically elevated and accelerated from September's ten-month low," it added.
Growth momentum
The services sector—a cornerstone of India’s economy—contributes over half of the country’s GDP.
India's economy surged 8.2% in 2023-24, bolstered by a 7.8% expansion in the January-March quarter, surpassing the Reserve Bank of India’s projected 7% growth rate for the fiscal year.
However, GDP growth softened to 6.7% in the April-June quarter, marking the slowest pace in five quarters, following a 7.8% increase in the preceding quarter, as per the statistics ministry.
"During October, the Indian services sector experienced strong expansions in output and consumer demand, as well as job creation, which achieved a 26-month high," said Pranjul Bhandari, chief India economist at HSBC.
"Although input price inflation is accelerating from higher food and wage costs, the general inflation trajectory remains below the long-run average. Meanwhile, business sentiment receded slightly from September, but the future activity index still indicates broadly positive expectations for the year ahead," Bhandari added.
Manufacturing growth
India’s manufacturing sector also picked up pace in October, shaking off an eight-month low in September as strong demand spurred growth in new orders and exports. The HSBC India Manufacturing PMI rose to 57.5, up from 56.5 in September, matching August's level and continuing a positive trend.
In September, manufacturing activity had slowed to an eight-month low, with factory production and sales growth dipping and international orders at their weakest in 18 months. October’s resurgence, however, points to renewed momentum across the manufacturing landscape.
Composite Output Index
The HSBC India Composite Output Index, a gauge of combined services and manufacturing output, rose to 59.1 in October from 58.3 in September, though it remained slightly below August's 60.7.
"New business inflows also expanded at quicker rates in both the manufacturing and service sectors, boosting growth of sales and employment at the composite level," the survey noted.
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"Goods producers recorded stronger rates of increase in new business and output than service providers in October, but the latter led when it came to job creation," it added, signalling continued resilience in India’s economy amid rising costs and global headwinds.
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Business NewsEconomyIndia’s service sector growth rebounds in October on higher demand
First Published:6 Nov 2024, 11:35 AM IST
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