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India’s Services PMI Rises To Highest In Over 11 Years

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A gauge of India’s services sector surged to the highest since April 2011 as demand improved despite price pressures.

The India Services Business Activity Index, compiled by IHS Markit, stood at 59.2 in June 2022 from 58.9 in May, according to a media statement. A reading above 50 indicates expansion in business activity.

The Composite PMI Output Index stood at 58.2 against 58.3 in May.

The upturn stemmed from ongoing improvements in demand after the retreat of pandemic restrictions, capacity expansion and a favourable economic environment. Services firms noted a substantial upturn in new work intakes at the end of the first fiscal quarter, with the rate of increase improving to the best in more than 11 years.

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Firms were able to secure new orders despite charging more for their services. The June data showed the fastest rise in selling prices since July 2017 as several companies sought to transfer part of their additional cost burdens to clients. Stronger increases in charges were seen across the four broad areas of the service economy, with the sharpest upturn recorded in transport, information and communication.

Despite easing to a three-month low in June, the overall rate of input cost inflation remained elevated by historical standards.

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Outstanding business rose for the sixth straight month and at the fastest pace since February 2021. Some companies responded to capacity pressures by hiring additional staff in June, but the vast majority (94%) left payroll numbers unchanged. Overall, services employment rose marginally, following a decline in May.

Unrelenting inflation, however, continued to concern businesses, who were “cautiously optimistic” about the year ahead for business activity. The overall level of sentiment was well below its long-run average as only 9% of companies forecast output growth.

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