India's crucial services sector regained its growth momentum in November, bouncing back after a slight slowdown the previous month. The latest survey data reveals a broad-based improvement in operating conditions, primarily fueled by stronger domestic demand and only mild inflationary pressures.
Key Drivers: Robust New Business and Softer Inflation
The seasonally adjusted HSBC India Services PMI Business Activity Index climbed to 59.8 in November, up from 58.9 in October. A reading above 50 indicates expansion, signalling a faster rate of growth for the sector. According to Pranjul Bhandari, Chief India Economist at HSBC, the rise was driven by robust new business intakes which subsequently fueled output growth.
A significant highlight was the cooling of input price inflation. The survey noted that input price inflation reached its lowest rate in nearly five-and-a-half years. This led to negligible increases in selling charges for services, providing some relief from cost pressures.
International Sales and Employment Trends
While international sales continued to grow, the pace of expansion eased to an eight-month low. Firms reported receiving orders from Asia, Europe, and the Middle East, but faced headwinds from fierce overseas competition and the availability of cheaper alternatives in other markets.
On the employment front, the services sector saw an increase in hiring during November. However, the pace remained moderate and was broadly consistent with the trends observed over the past two months. The survey indicated that most companies reported no change in their payroll numbers, reflecting a cautious approach to staffing.
Composite PMI and Future Outlook
The broader economic picture, captured by the HSBC India Composite PMI Output Index, eased to 59.7 in November from 60.4 in October. This signals the slowest rate of expansion since May, influenced by a softer growth in factory production alongside the services activity.
Looking ahead, business optimism softened slightly. Companies cited concerns over heightened competition and potential disruptions linked to state assembly elections. Despite these concerns, firms remained broadly positive about future output. This optimism is supported by expectations of sustained demand, increased social media engagement, new marketing initiatives, and efforts to limit price hikes.
The HSBC India Services PMI is compiled by S&P Global based on responses from approximately 400 service sector companies, providing a key snapshot of the health of one of India's most vital economic engines.
