Services exports expand at record pace in August

India's services firms indicated the sharpest upturn in new export business since September 2014, according to S&P Global.

The seasonally adjusted India Services PMI Index marginally fell to 60.1 in August from 62.3 in July. A reading above 50 indicates an overall increase in output.

India's service economy continued to thrive in August, with a series-record increase in new export business inducing another sharp expansion in total sales, the PMI report says.

Total new business increased for the 25th month in a row during August. Advertising and robust demand for services were among the reasons listed for growth. Although softer than in July, the overall expansion in sales was one of the strongest seen in 13 years, the report says.

"Indian services companies achieved a remarkable milestone in August, as they welcomed a series record surge in new export business. Several regions contributed to the upturn, including Asia Pacific, Europe, North America and the Middle East," says Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.

"This spike in international demand supported one of the best sales performances recorded over the past 13 years, and acted as a catalyst for firms to expand their workforces as well as output. Demand strength also fostered a heightened sense of optimism regarding the outlook, boding well for economic growth prospects," says Lima.

Finance and insurance again led growth of both new business and output in August, the PMI data shows.

Indian services firms managed to secure a healthy number of new business despite hiking their charges again, the report says. "Favourable demand trends also led to the joint-fastest increase in prices charged for Indian services in over six years, which may prompt attention from policymakers and potentially delay cuts to the benchmark repo rate," Lima says.

The overall rate of input price inflation remained above that seen for output charges, despite easing since July. The rate of increase was the second-fastest in over a year and above its long-run average. Companies suggested that food, input and labour costs all rose over the course of August.

Hiring activity across India's service economy continued to expand halfway through the second fiscal quarter. PMI survey participants reported a blend of permanent and temporary staff recruitment on both part- and full-time bases. The rate of job creation was moderate, but the strongest seen since last November.

Capacity pressures at service providers ticked higher in August, the report says.

Companies expect the output to remain on an upward growth path over the course of the coming 12 months. The overall level of positive sentiment climbed to its highest in the calendar year-to-date.