HSBC India Services Business Activity Index was at 60.3 in July, down fractionally from 60.5 in June and above the neutral mark of 50.0 for the 36th straight month.
Survey respondents mostly cited investment in technology, online offerings, new business gains and rosy demand as the main drivers of growth, according to a report based on the survey. When explaining cost increases, firms particularly mentioned labour and materials. The latter was in turn attributed to greater outlays on eggs, meat and vegetables.
The overall rate of cost inflation was solid and faster than that seen in June.
The third-fastest expansion in international sales for nearly a decade supported another robust increase in overall new order intakes, which in turn underpinned the hiring of full-time and part-time workers.
“Robust demand conditions, reflected by increased new orders from both domestic and international markets, led firms to increase hiring levels,” said Pranjul Bhandari, chief India economist at HSBC.Total new orders expanded at a historically sharp pace, with increasing export orders from countries including Austria, Brazil, China, Japan, Singapore, the Netherlands and the US, according to the respondents.Higher wage and material costs continued to push up business expenses, with the overall rate of inflation quickening from June, according to the survey.
Favourable economic conditions and optimistic expectations for output supported recruitment among services firms. The increase in employment levels was among the strongest in nearly two years.
“Looking ahead, services firms remained optimistic about the outlook for the year ahead,” Bhandari said.
Confidence in the outlook for demand and sales, alongside improved customer engagement and new enquiries, boosted optimism.
A sister survey last week showed India’s manufacturing activity slowed marginally in July. Put together, the HSBC India Composite Output Index posted 60.7 in July, down from 60.9 in June.