India's Services Sector Growth Hits 11-Month High in July
India’s services sector registered its strongest growth in 11 months in July, with the HSBC Services Purchasing Managers’ Index (PMI) at 60.5. A reading above 50 indicates expansion. The robust performance was driven by a sharp rise in new business, particularly a surge in export orders from Asia, Canada, Europe, the UAE, and the US. While the growth is a strong positive indicator for the Indian economy, the survey noted that inflationary pressures increased and job creation moderated.
Unpacked:
A PMI reading of 60.5 signals strong expansion in India’s services sector. Any figure above 50 reflects growth, and 60.5 is well above this threshold, suggesting robust activity, increased new business, and a healthy economic outlook for the sector.
Job creation moderated because, although demand rose and new business expanded, capacity pressures and existing workforce efficiency may have allowed firms to meet demand without significantly increasing hiring. The pace of employment growth was the slowest in 15 months, indicating cautious hiring despite strong business conditions.
Rising inflationary pressures were driven by increased costs for inputs such as food and wages. As these input costs rose, companies passed on the higher expenses to customers, resulting in output price inflation that exceeded the recent trend.
The surge in export orders is significant as it indicates strong international demand for Indian services, especially from Asia, Canada, Europe, the UAE, and the US. This boosts foreign exchange earnings, supports GDP growth, and enhances the sector’s resilience against domestic slowdowns.