Indian service providers experienced a significant upturn in business activity during July, supported by strong demand and investments in technology and online offerings, according to the latest HSBC India Services Business Activity Index. The seasonally adjusted HSBC India Services Business Activity Index, compiled by S&P Global, stood at 60.3 in July, down slightly from 60.5 in June.
While there was a slowdown in growth, business activity has remained above the neutral mark of 50.0 for the thirty-sixth consecutive month.
The overall rate of charge inflation reached a seven-year high, driven by stronger cost pressures and positive demand trends.
“Survey respondents mostly cited investment in technology, online offerings, new business gains, and rosy demand as the main drivers of growth,” the report said.
New orders expanded at a historically sharp pace, the HSBC report noted. Adding that services firms remain optimistic about growth prospects, with around 30 per cent of the survey panel forecasting greater output volumes over the next 12 months, and only 2 per cent expecting a decline. Confidence in demand and sales, along with improved customer engagement and new enquiries, boosted overall sentiment.
“Service sector activity rose at a slightly slower pace in July, with new business increasing further, primarily driven by domestic demand. Looking ahead, services firms remained optimistic about the outlook for the year ahead,” said Pranjul Bhandari, chief India economist at HSBC.
International sales saw the third-fastest expansion in nearly ten years, with rising export orders from countries including Austria, Brazil, China, Japan, Singapore, the Netherlands, and the US.
Employment levels rose at one of the strongest rates in nearly two years, with firms hiring both full- and part-time staff to meet the increased demand. Despite strong job creation, backlog volumes continued to rise moderately, reflecting sustained demand buoyancy. Higher wages and material costs contributed to an overall increase in business expenses, with the rate of cost inflation accelerating since June, the report said.
Firms cited increased costs for labour and materials, particularly noting higher outlays on eggs, meat, and vegetables. Despite the solid and faster rate of cost inflation, it remained below its long-run average.
First Published: Aug 05 2024 | 10:53 AM IST
