According to the latest HSBC India Services PMI report, improved demand conditions and higher new business inflows drove the increase in business activity. Despite the acceleration, the overall rate of expansion remained the second-weakest in nearly four-and-a-half years, since March 2022, and stayed fractionally below the long-run average of 54.5.
Pranjul Bhandari, Chief India Economist at HSBC, said, "India’s services activity expanded faster in August. Growth was supported by stronger output and new business, although the overall pace was still among the weakest seen in over four years, with some firms citing subdued bookings, competition and reduced transport operations."
The report said new business gained momentum on the back of improved customer demand and marketing initiatives. However, the growth rate in sales was the second-slowest since March 2022, affected by challenging conditions and softer client appetite in specific categories.
International business maintained a steady trajectory, with export orders recording gains across key markets including Australia, Brazil, Canada, Japan, Malaysia, Singapore, Sri Lanka and the UAE. The expansion, however, remained below its annual trend.
Recruitment across the services sector also strengthened significantly, registering the strongest pace of job creation in 15 months. About 11 per cent of surveyed companies reported adding staff to reinforce sales, customer service and digital capabilities.
At the same time, outstanding business declined for the second consecutive month as firms efficiently handled incoming requests amid softer overall order inflows.
"Employment increased at a marked rate, with job creation reaching a 15-month high. Price pressures picked up only modestly: input cost inflation edged up slightly, while prices charged rose at the fastest rate since March as firms passed on higher operating costs," Bhandari added.
Cost pressures remained moderate by historical standards, even as businesses reported higher expenses for electricity, labor, raw inputs, digital platforms, regulatory compliance and marketing. To protect margins, service providers increased selling charges at the quickest rate since March.
On a broader scale, the HSBC India Composite PMI Output Index remained unchanged from July at 54.3 in August. Stronger services momentum offset a slowdown in manufacturing output, keeping composite private sector growth steady. Aggregate employment, meanwhile, climbed at the quickest pace in 14 months as services recruitment outweighed manufacturing layoffs.
Business sentiment regarding the 12-month outlook remained largely unchanged from July and below the long-term trend. Service firms nevertheless maintained hope that ongoing technology adoption, fresh inquiries and broader demand conditions would support upcoming business cycles.
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