PMI Services June: A Rebound in Growth

The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 60.5 in June from 60.2 in May. Although the index peaked at 61.8 in January, the June reading signifies a positive trend as it remained well above the 50-mark, which separates expansion from contraction, for the 34th consecutive month. This performance also exceeded HSBC's projection of 60.4.

Sustained Expansion in New Orders

"New orders received by Indian service providers continued to rise in June, extending the current sequence of expansion to nearly three years," the survey reported. The pace of growth was notably sharp, surpassing the growth rate in May and significantly exceeding the long-run average.

Economic Implications

The services sector is a vital component of India's economy, accounting for more than half of the country's gross domestic product (GDP). The robust performance of the services sector contributes to the overall economic health of the nation. India's GDP expanded by 8.2% in the fiscal year 2023-24, with the January-March quarter growth at 7.8%, surpassing the Reserve Bank of India's (RBI's) revised forecast of 7% for the year.

Employment and Cost Dynamics

The survey highlighted an encouraging trend in employment, with services firms increasing their staffing levels at the fastest rate since August 2022. "Activity growth in India’s services sector accelerated in June, with the index rising to 60.5, led by an increase in both domestic and international new orders," stated Pranjul Bhandari, chief India economist at HSBC. Despite rising input costs, the increase was moderate, leading to a softer rise in output charges.

Outlook and Confidence

Overall, service providers remain confident about the business outlook for the coming year, although the level of optimism showed a marked decline in June. The data underscores a resilient and growing services sector, contributing significantly to India's economic momentum.

Conclusion

The PMI Services report for June illustrates a strong rebound in India's services sector, driven by robust domestic and international demand. This recovery has bolstered employment and contributed positively to the overall economic outlook. The sustained expansion in both services and manufacturing sectors reflects a healthy economic trajectory for India.