India’s services activity picks up in August, PMI rises to 54.1 but growth remains near four-year low

India’s services activity expanded at a faster pace in August, supported by stronger output and new business, although the rate of growth remained the second-slowest since March 2022, according to a monthly survey released on Thursday. 

The seasonally adjusted HSBC India Services PMI Business Activity Index rose to 54.1 in August from 53.3 in July, indicating that demand conditions remained supportive and new business continued to increase. 

However, the pace of expansion was the second-weakest since March 2022, with companies citing subdued bookings, intense competition and reduced transport operations. 

“India’s services activity expanded faster in August. Growth was supported by stronger output and new business, although the overall pace was still among the weakest seen in over four years, with some firms citing subdued bookings, competition and reduced transport operations,” said Pranjul Bhandari, Chief India Economist at HSBC. 

Employment rising at the fastest rate 

Despite the moderation in overall growth, firms continued to add workers, with employment rising at the fastest rate in 15 months. Price pressures also increased only modestly. 

“Employment increased at a marked rate, with job creation reaching a 15-month high. Price pressures picked up only modestly: input cost inflation edged up slightly, while prices charged rose at the fastest rate since March as firms passed on higher operating costs,” Bhandari said. 

Businesses reported higher spending on digital platforms, electricity, inputs, labour, marketing, and regulatory requirements. 

International demand remained another source of support. New export orders rose solidly in August, broadly matching July’s pace, with firms reporting stronger demand from markets including Australia, Brazil, Canada, Japan, Malaysia, Singapore, Sri Lanka, and the UAE. 

Business confidence about the year ahead was broadly unchanged from July, but remained below its long-run average. Service providers continued to expect market conditions and demand to improve while technology adoption and new business enquiries also supported optimism. 

Second-weakest since March 2022

The HSBC India Composite PMI Output Index, which tracks activity across the manufacturing and services sectors, stood at 54.3 in August, its second-lowest level since February 2022. Growth among goods producers slowed, while services activity accelerated. 

“An acceleration in growth of services activity offset a slowdown in manufacturing and left the pace of private sector growth unmoved in August. However, quicker expansions in aggregate employment and new order volumes were recorded,” the survey said. 

The Services PMI Business Activity Index is based on responses to a single question on whether business activity at companies increased, decreased or remained unchanged from the previous month. 

The HSBC India Services PMI is compiled by S&P Global from questionnaires sent to a panel of around 400 service-sector companies. The Composite PMI is a weighted average of the manufacturing and services PMI indices, with weights reflecting the relative size of the two sectors based on official GDP data.