India's services sector growth quickened substantially in April, with strong demand promoting the fastest increases in new business and output since June 2010.

The seasonally adjusted S&P Global India Services PMI rose from 57.8 in March to 62 in April, indicating the fastest expansion in output since mid-2010. A reading above 50 indicates an overall increase in output.

Out of the four monitored sub-sectors, the strongest increase in output was seen in Finance & Insurance. Companies became more optimistic towards future business activity, but job creation remained negligible, the PMI release states.

Mirroring the trend for business activity, new orders rose at the fastest pace since June 2010. Growth was linked by survey members to strong demand for services and competitive pricing.

Companies signalled an improvement in international demand for Indian services in April. New export business expanded for the third month in succession and at the fastest pace over this period, according to the PMI release.

The pick-up in demand occurred in spite of escalating price pressures. Input costs rose at the quickest pace in three months during April, and one that outpaced the long-run series trend. According to survey members, food, fuel, medicine, transportation and wages were the main sources of inflation.

"Having retreated in each month since the start of the current calendar year, input price inflation quickened in April. PMI survey participants indicated higher salaries and wages awarded to staff, as well as pressures from food, fuel and transportation costs. Accommodative demand conditions facilitated the pass-through of additional expenses to clients, with prices charged for the provision of services increasing at the strongest rate in 2023 so far," says Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

The combination of rising input costs and demand resilience urged services companies to lift their selling prices in April.

Despite the substantial uptick in new orders, staff levels in the service sector increased only marginally at the start of the first fiscal quarter. Whereas some companies lifted headcounts due to rising output needs, the vast majority left them unchanged amid sufficient workers for current requirements.

"One area of weakness highlighted in the latest results was the labour market. Despite the substantial pick-up in sales growth and improved business sentiment towards the outlook, the increase in employment seen in April was negligible and failed to gain meaningful traction," says Lima.

Meanwhile, April data pointed to a substantial increase in output across the Indian private sector, amid quicker expansions at goods producers and service providers. The S&P Global India Composite PMI Output Index rose from 58.4 in March to 61.6 in April, its highest mark since July 2010.

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