January 3, 2025
The finance and insurance sectors led the growth in services, recording the strongest gains in new orders and business activity
Input cost inflation eased across the private sector, but consumer services faced the highest cost pressures, with charge inflation most pronounced in transport and communication
The manufacturing PMI dropped to 56.4, its lowest level in 12 months, reflecting weaker production growth and fresh business orders
Combining services and manufacturing, the Composite Output Index climbed to 59.2 in December, signalling broad-based economic expansion
India’s Services Purchasing Managers’ Index (PMI) climbed to 59.3 in December 2024, marking a robust expansion in the country’s services sector, according to the HSBC India Services PMI compiled by S&P Global. The rise from November’s 58.4 was attributed to sustained demand, higher new business inflows, and workforce expansions, with companies ramping up capacity to meet growing workloads.
The finance and insurance sectors were key drivers of this growth, achieving the highest new orders and business activity within the services sector. December’s reading marked the strongest growth in services output in four months, continuing a 41-month streak of rising new orders.
Ines Lam, an economist at HSBC, noted the sector’s positive outlook: “India’s services companies displayed strong optimism as business activity reached a four-month high. Indicators like new business and future activity suggest this momentum will likely persist soon.” Easing input price inflation also bolstered business sentiment, Lam added, contrasting with a slowdown in the manufacturing sector.
Cost Pressures and Inflation
While cost burdens rose in December, the rate of input cost inflation softened compared to November’s 15-month high. Spending on food, labour, and materials remained significant, with consumer services firms bearing the brunt of cost pressures. Charge inflation was most evident in the transport, information, and communication sectors.
The easing of cost pressures extended across the private sector, resulting in a slower price rise for goods and services. However, capacity pressures persisted as firms reported increased backlog volumes reaching a seven-month high.
Manufacturing Sector Slows
In contrast to the services sector’s growth, India’s manufacturing PMI slipped to 56.4 in December, the lowest reading in 2024. The decline was attributed to softer expansion rates in production and new business orders, mirroring a slowdown observed in November and January of the same year.
The HSBC India Composite Output Index, combining services and manufacturing, increased to 59.2 in December from 58.6 in November. A PMI reading above 50 indicates expansion, while a figure below 50 signals contraction.
International service orders grew during the month, though slower than in previous periods. Overall, the services sector remains a bright spot in India’s economic landscape despite challenges in manufacturing. Industry experts anticipate continued service growth, supported by resilient demand and easing inflationary pressures.
Source: Business Standard