New Delhi: India’s services sector growth rose to a three-month high in December riding buoyancy in demand and higher sales, a private survey said on Friday.
The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P, rose to 59 in December, up from 56.9 in the month prior. The figure had stood at 58.4 in October.
The growth is still slower than in July, when India’s PMI was at 62.3.
A reading of 50 separates expansion from contraction.
India services PMI has expanded for 29 months, remaining above the contraction point.
The improvement in service sector growth comes on the heels of slowing manufacturing, which in December grew at the slowest pace in 18 months.
The rise in services in December will help India meet its targeted economic growth, which the Reserve Bank of India last month raised to 7% for FY24, from its earlier estimate of 6.5%.
“India’s services sector ended the year on a high note, with an uptick in business activity, led by a three-month-high new orders index," said Pranjul Bhandari, chief India economist at HSBC.
"Input costs rose at a slower pace than in November, continuing the softening trend which began in mid-2023. But output prices rose at a faster pace, indicating improved corporate margins in December," Bhandari added.
According to the survey, favourable economic conditions and positive demand trends were the key determinants of output growth, which led to a new business intake rising to its greatest extent in three months during December.
However, the rate of expansion in new export orders, which have eased since November, remained the softest since June, it added.
India’s services sector, one of the fastest growing in the world, contributes to over 50% of its GDP.
On the brighter side, December saw higher demand for Indian services from clients based in Australia, Canada, Europe, the Middle East and South America.
"Services firms in India expect the strong demand momentum to carry forward to 2024 which, coupled with advertising and better customer relationships, underpinned upbeat forecasts for output," the survey said.
The survey added that job creation in the service sector rose in December, as compared with the previous month.
The HSBC Global India Services PMI is compiled from responses to questionnaires sent to about 400 service sector companies.
The PMI data is an indicator of the health of the economy.
According to government data, the Indian economy expanded by 7.8% in the first quarter and by 7.6% during the second quarter of the current fiscal year on higher government and private spending and strong services growth.
On 3 January, HSBC released its latest survey on India’s manufacturing PMI, which grew at its slowest pace in 18 months at 54.9 during December.
The composite PMI, consisting the manufacturing and services indices, rose to 58.5 in December from 57.4 in November, indicating the sharpest expansion rate since September.
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