India’s services sector booms in June, driven by record export growth

New Delhi: Buoyed by strong demand and a record rise in export orders, growth in India’s dominant services sector rebounded in June from a five-month low in May. Growth also showed an improvement in job creation amid stronger growth in new orders and expansion in international sales. The sector’s index has been above 50, the threshold separating growth from recession, for almost three years, a private survey showed on Wednesday.

HSBC India’s seasonally adjusted services business activity in the Purchasing Managers’ Index (PMI) rose from 60.2 in May to 60.5 in June, indicating a sharp increase in production. “Strength in demand and rising new order flows were cited as key drivers of growth. New orders received by Indian service providers continued to rise in June, extending the current expansion sequence to almost three years,” the survey noted.

Commenting on the survey, Pranjul Bhandari, chief India economist at HSBC, said activity growth in India’s services sector accelerated in June, with the index rising 0.3 percentage points to 60.5, driven by a rise in new domestic and international orders, prompting service firms to increase hiring at the fastest pace since August 2022.

“Input costs rose at a moderate pace, leading to a milder increase in input charges in June. Overall, service providers remain confident about the business outlook for the year ahead, although optimism levels declined sharply during the month. The PMI also accelerated in June, supported by a stronger inflow of new orders. Manufacturing firms also contributed more to the expansion than services firms,” ​​Bhandari added.

The study also noted a record increase in international orders. “Asia, Australia, Europe, Latin America, the Middle East and the US were cited as sources of new work from abroad. Positive customer appetite encouraged service providers in India to recruit additional staff towards the end of the fiscal first quarter. Hiring levels rose at the fastest pace since August 2022 as short-term and permanent workers were hired to support new orders,” the study said.

On the price front, the survey also found that service providers saw a moderate increase in average spending due to higher food, fuel and labour costs. “However, the pace of inflation was the weakest in four months. Subsequently, sales prices also rose at the slowest pace since February. Going forward, service providers were confident of an increase in business activity over the next 12 months, with almost 23 per cent of panelists expressing optimism,” it said.