Strong demand revives India services PMI in October

Last month, the services sector in India experienced a resurgence in growth after reaching a 10-month low in September, driven by a notable increase in demand. A recent business survey further revealed a significant rise in the workforce within this sector.

Asia’s third-largest economy had a promising beginning in the final quarter of 2024, indicating a robust start and aligning with Reuters’ projected growth of 7.0% for this quarter, following a 6.8% growth in the previous quarter.

In the fiscal year 2023-24, services contributed approximately 55% to the gross domestic product (GDP) according to data released by the government.

In October, the HSBC final India Services Purchasing Managers’ Index, which is compiled by S&P Global, increased to 58.5, surpassing September’s 57.7 and outperforming the initial projection of 57.9.

For 39 months in a row, the index has remained above the critical 50-point threshold that distinguishes growth from decline.

In October, the services industry in India saw significant growth in production, customer interest, and employment generation,” observed HSBC’s leading economist for India, Pranjul Bhandari.

A reacceleration in the new business sub-index was observed due to strong demand both domestically and internationally, leading to enhanced exports to various regions such as Africa, Asia, the Americas, the Middle East, and Britain.

In response to this development, service companies increased their workforce at the quickest pace seen in 26 months. Despite a slight decline from September, the overall business sentiment remained optimistic for the upcoming year due to positive forecasts.

Service providers raised their prices in response to heightened cost pressures stemming from increased expenses across various sectors like food (eggs, chicken, meat, and vegetables), labor, and transportation, driven by strong demand, reaching a three-month peak.

The heightened possibility of inflation escalation in the most populous country globally has surged following a peak to 5.49% in September, marking a nine-month high. This development has impeded consumers’ purchasing power and might prompt the Reserve Bank of India to uphold elevated interest rates.

In an economic survey conducted by Reuters, a slim majority of economists anticipated that the RBI would decrease rates by 25 basis points to 6.25% in the upcoming month.

In the latest manufacturing PMI report unveiled on Monday, there was a notable increase to 57.5 recorded for the previous month. This surge, coupled with the uptick in services sector performance, resulted in a boost of the overall Composite PMI to 59.1, surpassing September’s figure of 58.3.