India's services sector grew slightly last month: Here's why
What's the story
India's services sector witnessed a slight growth in April, according to the HSBC India Services Purchasing Managers's Index (PMI). The PMI, compiled by S&P Global, rose to 58.7 in April from 58.5 in March. The increase was fueled by a sharp jump in new business volumes and a significant expansion of international demand since July 2024.
Demand boost
Business volumes and international demand surge
The PMI serves as a key indicator of economic activity, with values above 50.0 indicating growth and below signaling contraction. New business volumes soared in April, extending the trend seen over the last two months. International demand also witnessed strong growth, with export orders increasing at their quickest pace since July 2024.
Sector performance
Finance and insurance sector leads growth
The finance and insurance sectors were the top performers in April, clocking the highest growth rates for both output and new orders. In order to meet the rising client demand, service providers increased their workforce numbers for a 35th consecutive month. The pace of job creation accelerated from March and surpassed the long-term average.
Price trends
Input cost inflation eases, selling prices rise
On the pricing front, input cost inflation eased to its lowest in six months. Companies capitalized on strong demand conditions to pass on costs, raising their selling prices at a faster pace than in March. This easing of price pressures has given the Reserve Bank of India room to lower its key repo rate by 50 basis points this year, with potential further cuts expected soon.
Sentiment dip
Business sentiment declines amid competition
Despite the growth, business sentiment declined for the fifth straight month and hit its lowest since mid-2023. The dip in confidence was attributed to rising competition curbing optimism. The HSBC India Composite PMI, which covers both manufacturing and services, rose to 59.7 in April from 59.5 in March, indicating the strongest expansion in private sector activity since August last year.