December 4, 2024
New business growth remained solid, supported by the fastest international demand increase since August
Business confidence reached a six-month high, signalling optimism for strong demand in the year ahead
Employment in the services sector has grown fastest since the survey began in 2005
Inflation hit a 15-month peak due to higher labour and material costs, leading to steep price hikes for clients
India’s dominant services sector maintained its robust expansion in November, with steady demand fuelling business confidence and record hiring, even as inflationary pressures hit a 12-year high, according to an HSBC and S&P Global survey. The Services Purchasing Managers’ Index (PMI) remained virtually unchanged at 58.4 in November, compared to 58.5 in October, indicating sustained growth despite rising costs.
The sub-index for new business, a key indicator of demand, showed slight moderation from October but displayed no significant weakness, supported by the fastest rise in international orders since August. Businesses expressed optimism about the year ahead, with the future activity index climbing to its highest level in six months, driven by expectations of continued strong demand.
Hiring surged in November, with employment growth in the services sector hitting a record high since the survey’s inception in December 2005. This hiring spree, supported by growing confidence and a rise in new orders, reflected the sector’s resilience and ability to attract international demand, noted HSBC’s Chief India Economist Pranjul Bhandari. The uptick in employment could help counterbalance slower consumption, which has weighed on GDP growth.
India’s economy, the world’s fifth-largest, experienced slower growth in the July-September quarter, with GDP expansion easing to 5.4% from 6.7% in the previous quarter. Despite this, a Reuters poll revealed that the Reserve Bank of India is unlikely to adjust its monetary policy until early next year, as inflation in October exceeded the central bank’s 2-6% target range.
Inflationary pressures were pronounced in November, with input costs rising fastest in 15 months, driven by escalating labour and material expenses. Firms passed these costs onto clients, leading to the sharpest price increase in nearly 12 years.
The broader manufacturing sector also faced a slight deceleration, with the Manufacturing PMI dipping to 56.5 in November. This and minor easing in the services sector contributed to a slight decline in the Composite PMI, which fell to 58.6 from 59.1 in October.
Despite these challenges, the services sector’s robust performance underscores its pivotal role in supporting the Indian economy amidst inflationary pressures and global uncertainties.
Source: Economic Times