India services PMI rises to 54.1 in August; hiring hits 15-month high

India's services sector expanded faster in August, as businesses noted an improvement in their activity levels when compared to last month. An increase in orders as well as faster employment growth was observed by businesses. The growth in employment was the quickest in 15 months, according to the HSBC India Services PMI survey. 

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The seasonally adjusted HSBC India Services PMI Business Activity Index climbed to 54.1 in August from 53.3 in July. Any reading above 50 signals growth in activity. 

The rise in activity growth was moderate, with August’s reading marking the second lowest since March 2022 and also lower than the long-term average of 54.5 of the survey. 

Activity in India’s services sector quickened in August. This was helped by rising output and new business, though still among the weakest seen in almost four years,” stated Pranjul Bhandari, chief India economist at HSBC. 

Some firms continued to report weak bookings. Competition and reduced transport operations were also cited as factors holding back activity. 

New business sees some improvement 

New business flows to services firms accelerated at a faster rate in August amid robust customer demand and marketing efforts. 

However, the rate was still low relative to the recent past period. Growth in new business flows came in as the second slowest in nearly four-and-a-half years, with a number of firms citing tough market environment and lack of customer interest in some services. 

Foreign demand was another source of new business flows. Growth in new export orders picked up at a decent pace and was consistent with July. 

There were signs of strong demand for the services in Australia, Brazil, Canada, Japan, Malaysia, Singapore, Sri Lanka, and the United Arab Emirates. However, the growth in export sales was still below its one-year average level. 

Services companies add more workers 

There were more gains in employment during August. The pace at which services firms created jobs was the fastest in 15 months. Eleven percent of firms indicated an increase in employment. 

The extra hiring was attributed to the efforts by firms to help enhance customer services, sales and IT operations. 

Not all indicators rose. There was a fall in outstanding business for a second successive month, albeit only marginally. Lower levels of outstanding business were attributed to softer demand and the completion of new orders. 

Business expectations for the next 12 months were broadly unchanged from July and below its long-term average. Firms expected the market conditions to continue improving. Technology adoption and new inquiries also helped lift sentiment. 

Prices charged by services firms rise faster 

Input costs increased only slightly during August and remained moderate by historical standards. 

Companies reported higher spending on digital platforms, electricity, inputs, labour, marketing and regulatory requirements. 

The rise in prices charged by services companies was sharper. Charges increased at their fastest pace since March, with firms passing higher operating costs on to customers. 

Bhandari said price pressures had risen only modestly. Input cost inflation edged up, while prices charged by services companies recorded their fastest increase since March. 

Composite PMI holds at 54.3 

The HSBC India Composite PMI Output Index stayed at 54.3 in August, unchanged from July. 

The index covers both manufacturing and services. Faster growth in services offset a slowdown in manufacturing, leaving the overall pace of private-sector expansion unchanged. 

The composite reading continued to show growth, although it was the joint-slowest in four-and-a-half years. 

Employment across the private sector rose at its fastest pace in 14 months. Strong hiring in services more than made up for job losses in manufacturing. 

Cost pressures at the composite level eased, with input cost inflation falling to a seven-month low. Prices charged by businesses, on the other hand, rose at their fastest pace since April.