Growth in India’s key services industry accelerated last month on strong demand and a record rise in export orders, according to a business survey that also showed companies were hiring at the speed pace in nearly 2 years.
HSBC’s India Services Purchasing Managers’ Index, compiled by S&P Global, rose to 60.5 in June from 60.2 in May, close to the Reuters poll’s average forecast of 60.6 and the preliminary reading of 60.4.
It has been above 50 for almost three years, which separates growth from contraction.
HSBC Chief India Economist Pranjul Bhandari said activity growth in India’s services sector accelerated in June. led by a inflation in new orders, both domestic and international”.
New business – a key measure of demand – has been above breakeven since August 2021 and expanded at a faster pace last month. This was supported by the fastest increase in international orders since the sub-index was added to the survey nearly a decade ago.
This is good news for the economic outlook of India, which is already the seventh largest services exporter globally, according to the Reserve Bank of India.
Asia’s third-largest economy recorded faster-than-expected growth of 7.8% in the January-March quarter, but was expected to grow at a modest slower pace this fiscal year, a Reuters survey found.
Strong demand encouraged service providers to hire more staff. The pace of job creation was the strongest since August 2022, extending the current period of hiring growth to more than two years.
However, overall positive sentiment for the coming year fell to an 11-month low due to market uncertainty and concerns over competition.
“Overall, service providers are confident about the business outlook for the coming year, although the level of optimism has declined sharply during the month,” Bhandari said.
Meanwhile, costs rose at the slowest pace in four months, indicating low inflation, and the report said less than 5% of companies surveyed opted to pass the cost on to customers, resulting from the tariffs. The inflation rate remained only moderate.
A Reuters poll found that inflation will fall below the mid-point of the RBI’s medium-term target of 4% this quarter, but then rise next quarter. Nevertheless, there were expectations that the central bank would cut interest rates to 6.25% by the end of the year.
