Service sector

India’s service sector remains firm in April; inflation weakens business confidence, CFO News, ETCFO

By: Alekh Shah

Growth in India’s services sector continued to accelerate in April, with the S&P Global India Services Purchasing Managers’ Index (PMI) rising to 57.9 in April from 53.6 in March and 51.8 in february.

However, with selling prices rising at the fastest rate since July 2017 and a near-record rise in input costs, inflation fears continued to weigh on business confidence.

While the index remained above the 50 mark separating growth from contraction for a ninth consecutive month, it was the best start to the year for the sector since 2011/12.

Concerns over mounting pricing pressures drove a sub-index tracking business expectations over the next 12 months to a three-month low.

“Taken in isolation, the PMI data for the services sector was mostly encouraging, as growing demand supported faster increases in new business entry and production. Employment rose for the first time in five months, but the business climate was dampened by inflation fears,” said Pollyanna De Lima, deputy director of economics at S&P Global.

“Consumer services, finance and insurance were the best performing areas of the service economy, while real estate and business services were the only sub-sector to show a contraction in sales and of production,” added De Lima.

Although a sub-index tracking new business hit a five-month high in April, helped by the easing of COVID-19 restrictions, new export activity contracted at the fastest pace in seven months due to concerns over the Russian-Ukrainian war and a downturn. in China weighed on global economic activity.

However, companies resumed their hiring efforts in April, as evidenced by the first increase in employment since last November.

International demand for Indian services worsened in April, a trend that has been recorded every month since the onset of COVID-19 in March 2020. New orders from overseas fell at a marked pace which was the faster since September 2021.