The robust performance of the Indian service sector continued into August 2023, marking the 37th consecutive month of expansion. According to S&P Global's latest report, the seasonally adjusted India services purchasing managers index (PMI) surged to 60.9, a slight increase from July's reading of 60.3.
This figure remains significantly above the critical threshold of 50, which denotes growth in the economy. The increase in the PMI for August can be attributed primarily to a notable rise in new orders, with a particular focus on domestic demand. S&P Global emphasized, "The expansion in services was largely propelled by an increase in new orders, specifically from the domestic market." Among various sectors, finance and insurance were highlighted as the top performers within India's service economy, demonstrating significant growth in both output and new business volumes.
This segment's resilience reinforces the financial industry's crucial role in sustaining the overall economic momentum in the country. Furthermore, payroll growth within the service sector remained strong, reflecting the optimism of companies regarding favorable economic conditions. Approximately 20% of businesses surveyed expressed expectations for sales growth over the upcoming year, while a mere 1% anticipated a decline in their sales.
However, there was a slight dip in overall optimism as some companies expressed concerns over competitive pressures. Despite the positive news, service providers did face inflationary pressures related to input costs in areas such as food, labor, and transportation. Nonetheless, the report noted that the overall inflation rate was modest, being the lowest recorded since August 2020. The findings for the India services PMI were derived from responses collected from 400 service-sector companies between August 9 and August 28, showcasing a comprehensive view of the sector's performance.
In addition, S&P Global released the composite PMI data for India, which combines indicators from both the manufacturing and service sectors. The composite PMI registered at 60.7 in August, unchanged from the previous month, highlighting consistent expansion driven mainly by services. The data underscores the continued resilience and agility of India's service sector, which stands as a pillar of the national economy, even in the face of rising costs and competitive dynamics..