India’s services sector recorded its fastest growth in 15 years in August, supported by strong domestic and international demand, a private survey showed, according to a Reuters report. This surge came despite Trump’s 25 per cent tariff taking effect on August 7, followed by an additional 25 per cent (bringing the total to 50 per cent) on August 27.
However, the robust activity also pushed up prices at the quickest pace in more than a decade, raising concerns about inflation making a comeback.
Services PMI at 15-year peak
Earlier, HSBC’s India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, also rose to 62.9 in August from 60.5 in July. Though lower than the flash estimate of 65.6, the index remains firmly above the 50-mark that separates expansion from contraction.
“India’s services PMI Business Activity Index reached a fifteen-year high last month … on the back of surging new orders,” said Pranjul Bhandari, chief India economist at HSBC.
Export orders hit 14-month peak
As per the Reuters report, the survey showed new business expanded at the sharpest pace since June 2010. International demand also strengthened, with export orders rising at the fastest rate in 14 months.
Strong demand gave companies room to pass on higher costs to consumers. Output price inflation touched its highest level since July 2012, while input costs climbed at the fastest pace in nine months.
Inflationary risks re-emerge
The rise in prices comes at a time when overall inflation had cooled to an eight-year low of 1.55% in July. Economists now caution that the easing trend may have bottomed out, with inflation likely to pick up in the coming months.
Despite price concerns, business sentiment for the year ahead improved to a three-month high. Firms attributed this optimism to increased advertising spends and favourable demand forecasts. However, job creation in the sector remained modest.
Composite PMI hits 17-year high
The Composite PMI, which includes both services and manufacturing, rose to 63.2 in August from 61.1 in July, marking a 17-year high. The strong momentum in both sectors follows official data showing India’s economy expanded by 7.8% in the previous quarter, much faster than expected.
