Updated March 5th, 2024 at 10:35 IST

India's February services growth slightly slows but remains robust

While new business softened to a six-month low, it has sustained expansionary trends for over two-and-a-half years, with orders from abroad remaining resilient.

Reported by: Business Desk
India service sector growth | Image:Pexels
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India’s service sector growth: India's services sector maintained its strong growth momentum in February, although there was a slight moderation in the pace, according to a recent business survey. 

The survey also indicated a cooling of inflationary pressures, injecting a sense of optimism into the industry, which is a crucial driver of economic growth and employment.

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The HSBC India Services Purchasing Managers' Index (PMI), compiled by S&P Global, declined to 60.6 last month from January's six-month high of 61.8, which was contrary to the preliminary forecast of a rise to 62.0. 

Nevertheless, it has consistently remained above the 50-mark, indicating expansion, since August 2021.

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Ines Lam, an economist at HSBC, observed, "India's services PMI suggests that the pace of expansion in the services sector eased in February from January." This was attributed to a slowdown in the growth of new orders and output, which, despite remaining positive, contributed to a slight weakening in services companies' outlook for future business activity.

While new business softened to a six-month low, it has sustained expansionary trends for over two-and-a-half years, with orders from abroad remaining resilient. 

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However, the outlook for the next 12 months was less optimistic, marked by a decline in business optimism to its lowest level since November. 

Hiring slowed down, and employment generation barely remained in positive territory.

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Nevertheless, firms found some relief from inflationary pressures, as operating costs rose at the slowest pace since December. This moderation was reflected in the prices charged to customers, which rose at the slowest pace in two years.

India's retail inflation touched a three-month low in January and is expected to remain within the Reserve Bank of India's target range of 2 per cent-6 per cent over the coming months. 

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However, according to a recent Reuters poll, it is unlikely that the central bank will cut borrowing costs before July.

Despite the manufacturing industry growing at its fastest pace in five months in February, the slower expansion in services activity brought the HSBC India Composite PMI Output Index lower to 60.6 in February from the previous month's 61.2.

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(With Reuters Inputs)

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Published March 5th, 2024 at 10:35 IST