India’s services sector regained some momentum in August, with stronger output and a rise in new business helping activity expand faster than in the previous month. However, the pace of growth remained subdued by recent standards, with the sector recording its second-weakest expansion since March 2022, according to a monthly survey released on Thursday.
The seasonally adjusted HSBC India Services PMI Business Activity Index rose to 54.1 in August from 53.3 in July, signalling a modest improvement in operating conditions across the services economy.
Pranjul Bhandari, chief India economist at HSBC, said services activity expanded at a faster pace in August, helped by stronger output and new business. “Employment increased at a marked rate, with job creation reaching a 15-month high,” Bhandari said, while noting that price pressures increased only modestly.
The increase is supported by resilient demand and continued growth in new business. Companies also reported stronger activity following marketing efforts and improving customer demand.
Despite the improvement, the August reading pointed to a relatively soft expansion. Survey respondents cited subdued bookings, intense competition and disruptions to transport operations as factors weighing on growth.
Service-providers continued to see an increase in new orders during August, indicating that demand remained supportive despite the slower overall pace of expansion.
International demand also provided a boost. New export orders grew at a solid rate, broadly matching the pace recorded in July.
Companies reported stronger business from customers in several overseas markets, including Australia, Brazil, Canada, Japan, Malaysia, Singapore, Sri Lanka and the UAE.
One of the stronger signals in the August survey came from the labour market. Employment across the services sector rose sharply, with about 11% of companies surveyed reporting an increase in staffing levels. The pace of hiring was the fastest in 15 months.
Businesses needed additional staff to support customer service, sales and digital operations as workloads increased, HSBC said.
The stronger hiring trend in services also helped lift overall employment across India's private sector. Aggregate employment rose at its fastest pace in 14 months, with services-sector job creation more than offsetting a decline in manufacturing employment.
The broader private-sector picture, however, is less buoyant. The HSBC India Composite PMI Output Index remained at 54.3 in August, unchanged from July. Faster growth in services offset a slowdown in manufacturing activity.
Aggregate new order volumes, however, increased at a faster pace, suggesting that underlying demand across the private sector remained relatively firm.
At the same time, composite input-cost inflation eased to a seven-month low, offering some relief on the cost front.
The August data, therefore, presents a mixed picture of India's private economy: services activity improved and hiring strengthened, but the overall pace of expansion remained well below the levels seen during stronger phases of the post-pandemic recovery.
For the services sector, the rise in the PMI points to continued expansion, but the relatively weak reading underscores pressure from competition and softer bookings, even as domestic and international demand continues to provide support.
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