India’s Services PMI Rises To 60.9 In August

On the back of an increase in domestic orders and receding charge inflation, the country registered the strongest rate of expansion since March 2024 as the business activity expanded in August 2024. The seasonally adjusted HSBC India Services Business Activity Index was inside expansion territory for the thirty-seventh straight month. For August, the Purchasing Managers’ Index (PMI) numbers for services rose to 60.9 from 60.3 in July.

As the numbers surpassed the preliminary estimate of 60.4, the growth has been underpinned by productivity gains and positive demand trends. Moreover, payroll numbers rose solidly as companies remained upbeat regarding the economic outlook. Another positive development included a slowdown in output charge inflation, which was helped by cost pressures retreating to their lowest in four years.

As far as the new order growth is concerned, the rate of increase quickened marginally in August to remain at the strongest level since April 2024. Finance and insurance were the best-performing areas of India's service economy regarding both output and new business.

The international orders have risen to the weakest extent in the past six months as the new export business increased at a slower pace in August. The companies that witnessed an improvement attributed the same to better demand from Asia, Australia, Europe, Latin America, the Middle East and the United States.

“The Composite PMI for India continued to show strong growth in August, driven by accelerated business activity in the service sector, which experienced its fastest expansion since March. This growth was largely fuelled by an increase in new orders, particularly domestic orders,” stated Pranjul Bhandari, Chief India Economist at HSBC.

Few service providers reported an increase in their operating expenses, amid greater food, labour and transportation costs. However, the overall inflation rate was the weakest since August 2020. The overall rate of charge inflation remained moderate and the rise was slower than that in July.

“Employment levels remained robust, though there was a slight decrease in the pace of hiring compared to July. On a positive note, input costs rose at their slowest pace in six months, with both the manufacturing and service sectors exhibiting the same pattern. Consequently, output price inflation receded in August,” Bhandari added.

As per Bhandari, the outlook for the Indian private sector over the next year has moderated, reaching its lowest level in 15 months due to competitive pressure, although the Future Output Index remained above the long-term average.