India's services growth surges but export orders hit 8-month low
What's the story
India's services sector witnessed an acceleration in November, according to the latest HSBC India Services Purchasing Managers's Index (PMI) survey. The PMI rose to 59.8 last month from October's 58.9, indicating strong growth momentum driven by robust domestic demand. However, export sales growth hit an eight-month low due to rising global competition.
Growth indicators
PMI indicates sustained growth in services sector
The PMI reading remained above the 50-mark separating growth from contraction for the 52nd consecutive month. This was despite trailing the preliminary estimate of 59.5. The upturn was mainly driven by a sharp increase in new business intakes, which grew faster than the long-run average, highlighting strong domestic demand as a key driver of growth in India's services sector.
Export challenges
International demand and export orders slow down
International demand was less supportive with new export orders growing at their slowest since March. Survey participants noted that fierce competition and cheaper services in other markets constrained growth. This highlights a divergence in the economy where domestic consumption continues to drive services activity even as manufacturing sector and export demand face moderation.
Cost control
Input cost inflation and price hikes
The PMI data also showed that input cost inflation retreated to its lowest level since August 2020, despite marginal increases in food, electricity, and software expenses. This moderation allowed service providers to limit price hikes with only a negligible uptick in prices charged. The inflation rate was the weakest in over four years, supporting expectations of a potential rate cut by the Reserve Bank of India (RBI) this week.
Market outlook
Employment growth and business confidence
Despite the rise in output, employment growth remained modest with around 95% of surveyed firms reporting no change in payroll numbers. This indicates that the expansion in activity is yet to translate into significant job creation. Business confidence regarding the 12-month outlook slipped to its lowest level since July 2022 as firms expressed caution regarding competitive pressures.