India's January services PMI hits 6-month high amid strongest upturn in new business since mid-2023

Image for representation | Photo Credit: K.R. Deepak

The services sector growth in India rose to a six-month high in January as new business expanded at a faster pace amid buoyant demand from domestic and external clients, a monthly survey said on Monday.

The seasonally adjusted HSBC India Services PMI Business Activity Index rose to 61.8 in January, up from 59 in December, pointing to the sharpest rate of expansion in six months.

In Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction.

The survey is compiled from responses to questionnaires sent to a panel of around 400 service sector companies.

"India's services PMI rose to a six-month high in January. New business expanded at a faster pace and managers' expectation for future activity was strong. The new export business index accelerated, signalling that India's services exports remained robust," Ines Lam, Economist at HSBC, said.

New export sales rose at the fastest pace in three months. Monitored firms signalled gains from clients across the globe, including Afghanistan, Australia, Brazil, China, Europe, the UAE and the US.

On the prices front, companies noted a further increase in their overall expenses at the start of the 2024 calendar year, with food, labour and freight identified as the key sources of cost pressures.

However, with the vast majority of panellists opting to leave their charges unchanged and only 6 per cent hiking them, output prices rose to the least extent in 11 months.

According to the survey, business confidence has strengthened further. Besides demand strength, firms expect investment and productivity gains to induce output growth in the year ahead.

Meanwhile, the HSBC India Composite PMI Output Index rose from 58.5 in December to 61.2, indicating the sharpest upturn since mid-2023.

Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors according to official GDP data.

"January data highlighted a further acceleration in growth of Indian private sector output, amid quicker increases at both goods producers and service providers," the survey said.

Service providers led the upturn, although both segments recorded faster rates of expansion in new business, the survey added.