New orders take biz confidence to 3-mth high

India’s service activity rose at a slightly softer pace in April, backed by a further rise in new orders, with notable strength in domestic demand. Although new export orders remained robust, they showed a slight moderation from March - Pranjul Bhandari, chief India economist at HSBC

New Delhi: India’s services sector continued to register robust growth in April on the back of strong domestic and foreign demand, which lifted business confidence to a three-month high, according to an HSBC survey published on Monday.

The HSBC final India Services Purchasing Managers’ Index, compiled by S&P Global, came in at 60.8 in April, which was marginally lower than the 61.2 registered in March, but still the fastest growth rate in just under 14 years.

The services sector has been continuously registering growth since August 2021 with a PMI reading above the 50 mark which separates contraction from expansion on the scale.

Favourable market conditions and buoyant demand pushed the new business sub-index to a three-month high, the third-highest in around 14 years, the survey states.

The global demand for Indian services was robust, albeit lower than the figure recorded in March when it touched a record high.

“India’s service activity rose at a slightly softer pace in April, backed by a further rise in new orders, with notable strength in domestic demand. Although new export orders remained robust, they showed a slight moderation from March,” observed Pranjul Bhandari, chief India economist at HSBC.

The PMI manufacturing index released last Thursday also showed that robust growth was continuing in the industrial sector. The combined manufacturing and services activity PMI now works out to 61.5 which is only a tad lower than the 8-month high of 61.8 recorded in March.

“In terms of overall activity, aggregate output across both the manufacturing and service sectors rose significantly in April, albeit at a slightly slower pace, indicating sustained health in these sectors,” added Bhandari.

In addition to buoyant domestic demand, firms noted new business gains from several parts of the world, which collectively underpinned the second-quickest upturn in international sales since the series started in September 2014. On the job front, a few service providers in India showed an increased appetite for new hires in April, amid rising inflows of new business. However, several companies indicated that payroll numbers were sufficient for current requirements, and the rate of job creation was marginal and softer than that seen at the end of the previous fiscal year.

“In response to increased new orders, firms expanded their staffing levels, though the pace of hiring growth decelerated,” Bhandari said.

On the price front, wage pressures and higher food prices meanwhile led to another increase in cost burdens, which firms partially passed on to their customers.

“Input costs continued to rise sharply, albeit slower than in March, but resulted in squeezed margins for service firms, as only part of the price rise was passed on to clients through output charges,” Bhandari said.