India's service sector has demonstrated remarkable expansion in July, as reported by HSBC this Monday. The seasonally adjusted HSBC India Services Business Activity Index, compiled by S&P Global, decreased slightly from 60.5 in June to 60.3 in July. This figure, however, remains well above the critical 50-point threshold that distinguishes growth from contraction, signifying continued health in the sector. A notable driver behind this expansion is the increase in new business intake.
Service firms have reported substantial growth, spurred by robust demand conditions. Particularly noteworthy is the rise in international sales, which have surged at their third-fastest rate since the beginning of the monthly survey in September 2014. HSBC highlighted that some regions contributing to the rising export orders included Austria, Brazil, China, Japan, Singapore, the Netherlands, and the United States. In response to the intensifying demand, service firms have also increased their hiring practices, employing both full-time and part-time staff.
Anecdotal evidence suggests a significant ramp-up in recruitment to meet growing customer needs. Regarding operational costs, service providers have resorted to increasing their selling prices, achieving a seven-year high. This action is aimed at compensating for heightened labor and material costs that have impacted profitability. Looking ahead, Indian service companies have displayed an optimistic outlook concerning business prospects.
They are increasingly betting on enhanced customer engagement and inquiries, indicating a forward momentum that could sustain growth in the forthcoming periods. The recent survey from the service sector aligns with trends observed in the manufacturing industry during the same month. HSBC's seasonally adjusted India Manufacturing Purchasing Managers' Index, also compiled by S&P Global, saw a slight decline from 58.3 in June to 58.1 in July.
This index, however, still signals robust activity within the manufacturing sector. Additionally, the HSBC India Composite Output Index, which amalgamates figures from both the service and manufacturing PMIs, eased marginally to 60.7 in July from 60.9 in June. This still underscores strong growth momentum within the private sector, despite a slight deceleration. Both the service and manufacturing industries continue to exhibit solid expansion, with manufacturing showcasing sharper growth trends that have been consistent since February, reflective of the positive economic climate in the country..