India's services PMI hits 10-month high in June

India’s services sector growth hit a 10-month high in June, aided by strong demand and easing price pressures.

The seasonally adjusted HSBC India Services PMI Business Activity Index rose from 58.8 in May to 60.4 in June. A reading above 50 indicates an overall increase in output.

Companies linked the upturn to positive demand trends and ongoing improvements in sales.

Output and new order intakes rose at the fastest rates since August 2024, aided by another robust expansion in international sales and job creation, showed the PMI data. Despite slowing to the weakest in three months, the increase in export orders was among the strongest in the series history, it said.

"The Services PMI business activity index was up to a ten-month high, led by a sharp rise in new domestic orders. New export orders also expanded, albeit at a softer pace. Margins improved, as the rise in input costs was below that seen for output charges. Service providers remained optimistic about future growth, though their confidence faded a tad,” said Pranjul Bhandari, Chief India Economist at HSBC.

Overseas demand particularly improved from the Asian, Middle Eastern and US markets, according to the report.

Finance & Insurance topped the growth rankings. For both measures, the slowest expansions were in Real Estate & Business Services.

The ongoing expansion of the Indian service sector had a positive impact on recruitment, the report said. Employment rose for the thirty-seventh consecutive month in June, with the rate of job growth outpacing its long-run average despite slowing from May's record, it said.

The rate of input cost inflation across India's service economy eased to a ten-month low in June, and was below its long-run average.

Several service providers noted that they had maintained sufficient pricing power to pass on higher costs to clients.

Cost pressures were most intense in the Consumer Services category, while the fastest upturn in output charges was noted in the Finance & Insurance segment, showed the PMI data.

Elsewhere, Indian services companies noted a mild intensification of capacity pressures. Outstanding business expanded at a slight rate that was nevertheless faster than in May.

Optimism regarding the outlook for output levels in one year time was sustained, with 18% of service providers forecasting growth. This proportion of upbeat firms was, however, the lowest since mid-2022. Hence, the overall level of confidence fell and was below its long-run average.

Private sector output rises strongly and inflation rates recede

June data highlighted another substantial increase in Indian private sector activity. The HSBC India Composite PMI Output Index rose from 59.3 in May to 61.0, indicating the fastest rate of expansion in 14 months. Growth quickened at both manufacturers and service providers.

Similarly, there were stronger improvements in demand for goods and services. Aggregate new business increased at a sharp pace that was the quickest since August 2024. This was supported by a record expansion in international sales.

Despite an uptick in job creation among manufacturers, employment growth in the private sector softened, noted the PMI release. This reflected a slowdown among service providers. The overall rate of expansion was nevertheless historically elevated.

"Prices charged by private sector companies rose at the slowest pace in three months at the end of the first fiscal quarter. Concurrently, cost burdens increased at the weakest rate since August 2024. For both indicators, slowdowns were broad-based across the manufacturing and service economies," the report said.