India’s services sector Purchasing Managers’ Index (PMI) fell slightly to 61.2 in May from 62 in April, according to S&P Global India Services PMI Business Activity Index. However, it still represents the second-strongest growth rate in nearly 13 years. The output of the service industry increased at the second-quickest pace since July 2010, supported by favorable demand conditions and new client acquisitions. To accommodate the rising workload, companies expanded their workforces. However, inflationary pressures intensified, leading to higher input costs and output charges.
Demand remained robust, contributing to an increase in new business for service providers, although the rate of expansion softened from the previous month. The export of Indian services also improved, with the fastest pace of growth so far this year. Despite the positive outlook, concerns about inflation and competitive pressures slightly dampened confidence among service providers.
The employment rate in the service sector increased at the fastest pace in 2023, and outstanding business continued to rise. Input prices rose markedly, driven by higher costs of food, inputs, transportation, and wages. Service companies remained optimistic about future business activity, citing advertising, demand strength, and favorable market conditions. However, the persistence of output charge increases could impact purchasing power, affordability, and economic growth. Policy-makers are closely monitoring inflation, making interest rate cuts less likely in the near term.
