India’s services sector growth accelerated to a five-month high in April, driven by stronger domestic demand even as export orders softened amid the ongoing West Asia crisis, according to a monthly survey released on Wednesday. 

The seasonally adjusted HSBC India Services PMI Business Activity Index rose to 58.8 in April from 57.5 in March, marking the fastest expansion since November. In PMI terms, a reading above 50 indicates expansion while a figure below 50 signals contraction. 

“India's services PMI climbed to a five-month high of 58.8 in April. Activity and new orders strengthened, even as new export orders eased, suggesting that demand is rotating from overseas markets to domestic consumers amid the Middle East conflict,” said Pranjul Bhandari, Chief India Economist at HSBC. 

Robust growth in business activity

The survey pointed to robust growth in business activity and new orders, supported by competitive pricing, the rise of e-commerce, and strong demand for relocation and logistics services. However, new export orders eased during the month, reflecting weaker international demand. 

Participants noted that geopolitical tensions in West Asia and subdued inbound tourism weighed on international demand for Indian services. At the same time, firms reported a continued rise in operating expenses, with input cost inflation remaining elevated despite moderating slightly from previous months. 

Higher costs were attributed to increases in food items such as cooking oil, eggs, meat, and vegetables, along with gas prices, labour expenses, and reported gas shortages. While companies raised selling prices, only part of the cost burden was passed on to customers, leading to a three-month low in output price inflation. 

“Input cost inflation moderated but remained elevated while output price inflation stayed subdued, indicating that some firms are absorbing higher costs rather than passing them on,” Bhandari added. 

Despite cost pressures and geopolitical uncertainties, service providers remained optimistic about growth prospects over the next 12 months, although overall business confidence softened compared to March. 

On the employment front, firms expanded their workforce at the start of the new fiscal year, with hiring focused on short-term staff and junior-level roles to manage rising workloads. 

The HSBC India Composite PMI Output Index rose to 58.2 in April from 57.0 in March, indicating a strong pace of overall economic expansion, albeit one of the slowest in about two-and-a-half years. The composite index is a weighted average of manufacturing and services PMI readings. The services PMI survey, compiled by S&P Global, is based on responses from around 400 companies across sectors including transport, finance, real estate, communication, and business services.