The India services PMI® survey revealed a strong performance for the sector during July, with improvement in demand conditions, seeing strongest increases in new business and output in over 13 years.
Cost pressures intensified, though charges were raised to a weaker extent as firms were cautious about their pricing strategies. Looking ahead, companies predict higher activity levels.
Rising from 58.5 in June to 62.3 in July, the seasonally adjusted S&P Global India Services PMI® Business Activity Index signalled the sharpest increase in output since June 2010. The upturn was largely attributed to demand strength and new business gains.
Demand for Indian services improved to the greatest extent in over 13 years during July, with around 29 per cent of survey participants reporting higher intakes of new business.
Rise in international sales boosted the upturn in total new orders. Service providers saw the second fastest increase in new export orders since September 2014. Bangladesh, Nepal, Sri Lanka and the UAE were key sources of growth.
July data signalled an increase in input costs facing Indian service providers, leading a 13-month high
To protect margins from cost rises inflation rate, especially in food, labour and transportation costs services firms, raised selling charges in July, but increase in output prices was the slowest in three months due to cautious pricing strategies to prevent any negative impact on new business.
Although there was mild pressure on service providers' capacity, as outstanding business volumes grew marginally, they continued to hire more staff, including part-time, full-time, permanent, and temporary employees.
Pollyanna De Lima, Economics Associate Director, S&P Global Market Intelligence, said, "The broad increases in sales across the domestic and international markets are particularly welcoming news, especially in light of the challenging global economic scenario. Firms noted a widespread upturn in services exports to several nations including Bangladesh, Nepal, Sri Lanka and the UAE.
"Looking at PMI price indices in recent months, it seems that competitive advantage continued to support demand for Indian services, with increases in output prices here modest relative to several other nations. Although input cost inflation ticked higher in July, service providers were again cautious in their price-setting decisions amid efforts to not deter sales."
Looking at the year-ahead outlook for business activity, service providers remained optimistic, expecting growth due to strong demand and marketing initiatives. This sentiment slipped from June's six-month high owing to concerns surrounding extreme weather.
