India’s service activity at 15-year high in August amid 49 straight months of order growth

New Delhi: India’s service activity raced to a 15-year high of 62.9 in August, from 60.5 in July, as robust demand spurred a rush of new orders, showed a private survey released on Wednesday.

The HSBC India Services PMI Business Activity Index, compiled by S&P Global, was 60.9 in August 2024. Survey respondents attributed the growth to demand buoyancy, efficiency gains, and higher inflows of new business.

“India’s services PMI Business Activity Index reached a fifteen-year high last month, from 60.5 in July to 62.9 in August, on the back of surging new orders,” said Pranjul Bhandari, India chief economist at HSBC.

The PMI (Purchasing Managers Index) reading stayed above the crucial 50 mark, which separates expansion from contraction.

August marked the 49th consecutive month of new order growth, the highest in over 15 years.

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According to the survey, 37% of service providers reported growth compared to 11% citing a decline.Stronger sales were also supported by robust export orders, with international sales seeing the third-fastest increase since September 2014. Firms cited greater demand from clients in Asia, Europe, the Middle East, and the US.

Employment rose moderately from July, with most of the increase coming from temporary hiring. “The broad-based expansion in international sales bolstered overall demand, which prompted Indian services firms to hire additional workers,” noted Bhandari.

On the cost front, business expenses rose at the sharpest pace since November, largely due to higher labour costs-salary hikes and overtime payments. Increased transportation and material costs were also cited as the reason by few firms.

Strong demand also inflated selling prices, with the rate of charge inflation reaching its steepest level in over 13 years.

“Reflecting higher labour costs and robust demand conditions, both input and output prices increased substantially in August,” said Bhandari.

Business expectations for the year-ahead improved to a five-month high in August, equalling May, supported by budget allocation for advertising, optimism over demand, and recent staff recruitment. Overall, the private sector posted its fastest growth in more than 17 years, with the HSBC India Composite PMI Output Index rising to 63.2 in August from 61.1 in July.

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