Record Demand Propels Services Sector to 6-Month High in India

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According to the latest S&P Global India Services PMI survey, the Indian services sector achieved a six-month high in growth during December, thanks to a surge in new work and favorable market conditions. The seasonally adjusted S&P Global India Services PMI Business Activity Index increased from 56.4 in November to 58.5 in December, marking the strongest rate of expansion since June 2022. This marks the 17th consecutive month in which the headline figure has been above the neutral 50 threshold, indicating expansion.

“December saw a welcome expansion in Indian services activity, underscoring the resilience of demand as 2022 came to an end,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence. De Lima also noted that “as we head into 2023, companies signaled strong optimism towards the outlook for output. Around 31% of panellists forecast growth, while only 2% anticipate a contraction.”

In addition to the growth in business activity, the survey also revealed that more jobs were created in December and companies remained highly optimistic about the outlook for business activity in the coming year. However, De Lima pointed out that “there were areas where capacities were reportedly adequate to cope with current requirements.”

The survey also found that input costs at services companies rose due to wage pressures and increased prices for energy, food, and transportation. As a result, the rate of inflation reached a two-month high and was above its long-term average. The S&P Global India Composite PMI Output Index, which measures combined services and manufacturing output, rose from 56.7 in November to 59.4 in December. The survey noted that there were quicker increases in input costs across both the manufacturing and service sectors, and that “aggregate sales rose sharply and at the fastest pace since August, boosted by quicker expansions at goods producers and services companies.”

Overall, the S&P Global India Services PMI survey shows that the Indian services sector had a strong end to 2022, with robust growth, increasing employment, and high levels of optimism for the future. It remains to be seen how the sector will perform in the coming months, but the positive trends from December provide a promising foundation for future growth.