India's Services PMI Slips In April, However, New Business Growth Remains Fastest Seen In 14 Years

At 61.5, the HSBC India Composite PMI Output Index for April missed the Flash estimate of 62. However, the reading remained one of the highest witnessed in almost 14 years

The companies also recorded the second-fastest rise in new export business in almost a decade. Overall sales expanded at its strongest rate in 14 years, well above the long-run average. 

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The HSBC Services PMI for India for April slipped to 60.8 in April, against a reading of 61.8 in March. However, the seasonally adjusted HSBC India Services Business Activity Index indicated one of the strongest growth rates recorded in about 14 years. 

Composite PMI

At 61.5, the HSBC India Composite PMI Output Index for April missed the Flash estimate of 62. However, the reading remained one of the highest witnessed in almost 14 years. The Composite PMI number for March stood at 61.8. 

Global Sales

The HSBC PMI data, compiled by S&P Global, showed that the service sector clocked a robust start to the new fiscal year. Firms recorded new business gains from across the world, in turn, resulting in the second-quickest growth in global sales since the survey started in September 2014. This growth in sales was attributed to a record level growth in services exports, backed by a favourable economic condition, demand strength, and surging intakes of new work. 

The companies also recorded the second-fastest rise in new export business in almost a decade. Overall sales expanded at its strongest rate in 14 years, well above the long-run average. 

Hiring Trends

Backed by strong inflows of new business, certain firms looked into employing more people in the month. However, many companies stated that their workforce remained sufficient to cater to current requirements, and the rate of employment generation remained marginal and softer in comparison to March end. 

Inflation And Operating Costs

The overall rate of inflation pulled back since March and was broadly aligned with its long-run average. The Consumer Services segment saw by far the sharpest increase in input costs. A backdrop of robust underlying demand enabled service providers to pass part of their additional cost burdens through to clients in the form of increased charges. The rate of selling price inflation eased from March's near seven-year high and was close to its long-run trend. 

However, wage pressures and rising food prices resulted in some cost burdens, which were passed on partially to the customers by the companies. The survey clocked steep growth in the Finance & Insurance sector. Operating expenses remained on the higher end, owing to surging input and labour costs.

Elaborating on the findings, Pranjul Bhandari, Chief India Economist, HSBC, noted, “India’s service activity rose at a slightly softer pace in April, backed by a further rise in new orders, with a notable strength in domestic demand. Although new export orders remained robust, they showed a slight moderation from March figures. In response to increased new orders, firms expanded their staffing levels, though the pace of hiring growth decelerated. Input costs continued to rise sharply, albeit slower than in March, but resulted in squeezed margins for service firms, as only part of the price rise was passed on to clients through output charges. Overall confidence among service providers for the year-ahead outlook improved markedly, bolstered by resilient demand conditions. In terms of overall activity, aggregate output across both the manufacturing and service sectors rose significantly in April, albeit at a slightly slower pace, indicating sustained health in these sectors.”