Robust demand propels India’s services sector growth in February: PMI

GROWTH in India’s services sector accelerated in February, supported by robust demand and a firm business outlook that led to a substantial increase in hiring, a survey showed.

Asia’s third-largest economy expanded 6.2 per cent year-over-year last quarter, lifted by government and consumer spending. The government expects India to grow 6.5 per cent for the full financial year on expectations urban consumption will improve after weakening due to feeble job and income growth.

HSBC’s final India services Purchasing Managers’ Index, compiled by S&P Global, rose to 59.0 in February from January’s 26-month low of 56.5 but was lower than a preliminary estimate of 61.1.

It has remained above the 50-mark separating expansion from contraction since mid-2021.

“Global demand, which grew at its fastest pace in six months according to the new export business index, played a major role in driving output growth for India’s services sector,” noted Pranjul Bhandari, chief India economist at HSBC.

Overall demand for services picked up in February, recovering from January’s 14-month low, while growth in foreign orders reached its highest in six months.

Services companies remained optimistic about the business outlook for the upcoming 12-months. The future activity sub-index, gauging sentiment, stayed firm despite falling to a six-month low.

To meet rising demand, companies hired additional staff leading to a strong expansion in employment.

The rate of cost price inflation slipped to a four-month low. Despite that, firms passed on some of the extra burden to customers leading to a higher increase in charge inflation last month.

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Inflation in India has mostly remained within the Reserve Bank of India’s (RBI) target range of 2 to 6 per cent, prompting the central bank to cut its key repo rate in February. The RBI lowered the interest rate to 6.25 per cent from 6.50 per cent and is expected to ease further to boost the economy.

The substantial rise in services growth offset a 14-month low expansion rate in manufacturing, driving the overall Composite PMI to rise to 58.8 last month from 57.7 in January. REUTERS