India's service sector growth picked up in October 2024 after slipping to a 10-month low in September as demand expansion led to increased hiring. October saw healthy customer demand domestically and from abroad amid optimism regarding near-term prospects, according to the latest survey by HSBC India and S&P Global.
The seasonally adjusted HSBC India Services Business Activity Index is based on a single question asking how the level of business activity compares with the situation the month before.
The HSBC India Services PMI index, conducted by S&P Global, saw sharper expansions in output and new business as job creation strengthened, rising from 57.7 in September to 58.5 in October.
The headline figure was consistent with a sharp and accelerated rate of growth that outpaced its long-run average (54.1), the survey data shows.
Pranjul Bhandari, chief India economist at HSBC, says during October, the Indian services sector experienced strong expansions in output and consumer demand, as well as job creation, which achieved a 26-month high.
Input costs increased at the "strongest pace" for three months in October. The HSBC survey says the higher business expenses were largely attributed to rising wage bills and food costs. Efforts to pass these on to clients meant that selling charges were hiked again.
"Although input price inflation is accelerating from higher food and wage costs, the general inflation trajectory remains below the long-run average. Meanwhile, business sentiment receded slightly from September, but the future activity index still indicates broadly positive expectations for the year ahead," says Bhandari.
The latest data also highlighted a recovery in the growth of new export sales across India's service economy, which survey respondents attributed to strengthening demand from clients in Africa, Asia, the Americas, the Middle East and the U.K.
October also saw a marked expansion in services employment, one that was the "quickest" for 26 months. Around 13% of panellists reported job creation, compared to 9% in September. Anecdotal evidence showed a sustained improvement in new business-induced firms to hire full- and part-time workers.
Underlying data indicated that capacity pressures also boosted job creation. "Outstanding business volumes increased for the thirty-fourth straight month, with the rate of accumulation quickening to the highest since July."
The survey data shows the overall rate of inflation remained below its long-run average. Out of the four monitored sub-sectors, cost pressures were highest in consumer services. "Companies shared part of their additional cost burdens with clients by continuing to lift selling prices. The rate of charge inflation picked up to the strongest since July and outpaced the series trend."
The finance & insurance segment again registered the strongest upturn and 74% of firms foresee no change in business activity from present levels.
The October month also saw a recovery in the growth of aggregate output Indian private sector activity increased to a greater extent at the start of the third fiscal quarter, owing to stronger growth at both goods producers and service providers.
Resultingly, the HSBC India Composite Output Index rose from September's 10-month low of 58.3 to 59.1, a level consistent with a sharp rate of expansion.
New business inflows also expanded at quicker rates in both the manufacturing and service sectors, boosting growth of sales and employment at the composite level.
