NEW DELHI: India’s services sector remained strong in the month of November with HSBC India Services Business Activity Index, or services PMI for the month at 58.4, down only fractionally from 58.5 in October, amid a consistent demand that led to a significant rise in business sentiment and record hiring. According to several panel members, with growth of new orders and output receding only fractionally, India’s service economy posted yet another impressive performance in November. The index has been above the neutral 50-mark that separates contraction from expansion for the 40th month straight.
The HSBC PMI survey also showed that ongoing improvements in sales added to firms’ capacity pressures subsequently boosting job creation. Amid the hiring of permanent and temporary staff, employment growth reached a survey peak. The downside to this unprecedented upturn in job creation, per the report, was an intensification of price pressures. Input costs rose to the greatest extent in 15 months, while selling prices increased at the fastest rate in close to 12 years.
Pranjul Bhandari, Chief India Economist at HSBC, said, “India posted a strong 58.4 services PMI in November 2024, down only a fraction from the prior month’s 58.5. During November, services sector employment notably grew at the fastest pace ever recorded since this survey began in 2005. The hiring surge reflected the sector’s improving business confidence, growing new orders, and vigorous international demand. At the same time, high food and labour costs drove up input and output prices to their fastest rates in 15 months and nearly 12 years respectively.”
When explaining the upturn, survey participants remarked on demand strength and new business gains. According to the panellists, improving international demand for their services helped growth with export orders increasing at a solid rate which was the quickest in three months, but well below those seen around mid-year. Firms noted gains from clients in Asia, Europe, Latin America and the US.
This increase in demand led to services firms to expand their operating capacities through recruitment drives. Anecdotal evidence highlighted a combination of permanent and temporary hires in November. Overall employment rose at the fastest pace seen since the inception of the survey in December 2005.
Further, the services companies observed another upturn in business expenses midway through the third fiscal quarter with the rate of inflation at the strongest level in 15 months and above its long-run average. This intensification of cost pressures, said S&P Global, reportedly prompted service providers to lift their own charges in November. On some occasions, companies suggested that hikes were supported by rosy demand. Output prices increased at the fastest rate in close to 12 years.
Finally, the report said, service providers were more confident regarding the year-ahead outlook for business activity. “Confidence reached its highest level since May, boosted by predictions of continued demand strength and expectations that marketing efforts will drive new business,” it said.
Source: The Financial Express
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