India’s services sector activity, as measured by the Purchasing Managers’ Index (PMI), reached a 13-year high of 62 in April, according to data released by the S&P Global on Wednesday, despite rising cost pressures for the beginning month of fiscal 2023-24.
The seasonally adjusted Services PMI was up from 57.8 in March, supported by healthy inflows of new businesses and favourable market conditions. The latest April value signalled the fastest pace of expansion in output since June 2010. A PMI reading above 50 indicates an expansion in services activity.
“India’s service sector posted a remarkable performance in April, with demand strength backing the strongest increases in new business and output in just under 13 years. Finance & Insurance was the brightest spot, topping the sectoral growth rankings for both measures,” said Pollyanna De lima, Economics Associate Director at S&P Global Market Intelligence in a statement.
To be sure, rising cost pressures in April – input costs rose at the quickest pace in three months and outpaced the long-run series trend – did not deter sales growth and services demand stayed resilient. Because of this, producers were able to pass higher costs into selling prices in April, which was also the strongest since January.
Along with robust domestic demand, the international demand rose for the third consecutive month in April and at the fastest pace since February.
However, the substantial pick-up in sales growth did not translate to an increase in employment in April as most firms reported having sufficient workers to meet current requirements.
Experts believe the services sector is expected to carry the momentum forward. “We expect domestic demand for contact-based services and steady momentum in services exports to continue to lead GDP growth. Hard data for manufacturing/ industrial activity, however, is showing some signs of a slowdown (for instance, growth core infrastructure index slowed in March in y/y terms). Services-led growth, coupled with slowing commodity prices and consequently improving external metrics, supports our view of a stable macro outlook for India in the year ahead,” Rahul Bajoria, managing director and head of EM Asia (ex-China) said in a note.