After ending 2024 on a strong footing, service providers in India recorded a loss of growth momentum in January with HSBC India Services Business Activity Index, or services PMI for the month falling to 56.5 from 59.3 in December. New business intakes rose at the slowest pace since November 2023, curbing the upturn in business activity. However, the headline figure was down from 59.3 in December to its lowest level since November 2022. Nevertheless, rates of expansion remained historically high and more jobs were created, stated the report by S&P Global.
On the price front, cost burdens increased to broadly the same extent as in December, with firms largely reporting greater payroll expenses. Meanwhile, charge inflation ticked higher, reported the HSBC India Services PMI, compiled by S&P Global.
Pranjul Bhandari, Chief India Economist at HSBC, said, “India’s services sector lost growth momentum in January, although the PMI remained well above the 50-breakeven level. The business activity and new business PMI indices eased to their lowest levels since November 2022 and November 2023 respectively. That said, new export business partly countered the downtrend and continued to rebound from a dip in late-2024, in line with official data which showed India’s services exports shinning in December and capturing a larger share of global trade.”
Several companies that participated in the survey linked output growth to favourable demand conditions, new business wins and investment in technology. However, a few firms suggested that activity levels at their units were constrained by a fall in customer numbers. While the overall new business continued to increase strongly, the rate of expansion softened to the weakest in 14 months. Growth was reportedly curbed by intense competition.
Per the report, there was increase in international sales with gains from clients in Asia, Europe, the Middle East and the Americas. The overall rate of expansion hit a five-month high, it said.
The improvements in new business intakes and the rising capacity pressures also prompted service providers to recruit additional staff at the start of the last fiscal quarter, wherein they recruited full- and part-time employees. The rate of job creation accelerated from December and was among the fastest seen since data collection started in December 2005.
With positive client demand, the outstanding business volumes rose for the thirty-seventh straight month in January, and also to the greatest extent since last May.